USD 02 (Oct 09 - Sep 10)

[winston]

CLSA's Chris Wood "In Five Years The US Dollar Paper Standard Will Collapse" by Tyler Durden

Chris Wood, who publishes the famous Fear and Greed newsletter, which Zero Hedge has republished on many occasions in the past (and whose latest edition can be found here), has some very scary things to say about the dollar in his interview by the CNBC lunch brigade.

While Wood is still optimistic on Asia, and specifically China, due to lack of deflation in the region (for now), and expects an appreciation of the yuan soon, he is about as pessimistic on the dollar and "developed" economies as they come.

My view is that there is an inevitable endgame as a result of all this massive spending of taxpayer money in the West and Japan to bail out bankrupt banking systems, so in my view unfortunately the end game will be systemic government debt crisis in the western world. It will probably happen in Europe and will climax in the US, and i am expecting on a five year view the collapse of the US Dollar paper standard...

The key reason why that is the endgame is that this credit crisis we saw in the west in 2008 and 2009 has simply been deferred, because 95% of the so-called government policy solutions to deal with this crisis have simply been to extend government guarantees.

So the problem has been transferred from the private sector to the public sector. It is just a matter of time before investors revolt against these sovereign guarantees...The crisis is going to happen first in Europe, the US will be the endgame.

http://www.zerohedge.com/article/clsas- ... taxpayer-f

[winston]

The dollar started stronger given some decent economic data. It was trading at 1.3559 Euros prior to the open, better than the 1.3581 shown on Thursday. As the day wore on, the dollar once again faded off its highs. At the close it was down against the Euro (closing 1.3618), breaking back above the 1.36 level that used to be the bottom of the range.

It has broken through several times and can easily rally back up since the ice is broken, but it had also failed to take advantage of that move. It is getting shoved back down each time. It is a strange move because one would expect the dollar to strengthen as the economy strengthens.

Investors obviously were not that excited about the jobs number. They must have viewed it as something of an anomaly given that the weather plays such a significant roll. It is strange that the dollar is not surging higher with the market if this is based on a stronger US economy. The dollar is still in its uptrend, but it made a break lower on Wednesday that broke its near-term trend.

Since then, you have to watch it closely to see what it does. It could continue to consolidate and start higher as it did in late December and early January. Indeed, this is a very long, strong move from mid-January up to the end of February, and one would expect some kind of consolidation. It is giving it right now, and it is still in decent shape thus far. It has not rolled over by any means.


Source: MarketFN.com

[winston]

Looking at the DXY0 chart, it has been consolidating laterally after a nice move higher from January into mid-February, but then things got dicey on Friday. It sold off hard and broke to a new closing and intraday low on the session. It is still in pullback mode.

It is not a dangerous break it is still rising above the 50 day EMA which is where it held in January with the first test of the trend break. It is not in any serious trouble right now, but the violence of the selling on Friday was somewhat surprising, particularly since there were stories that the UK would be the next Greece.

One would think that would have bucked the dollar up against the pound as well as the Euro, but it did not (1.3758 Euro versus 1.3675 Thursday). The dollar had broken below the 1.36 level on the Euro, and it traded there quite a bit last week and early this week. It then slipped back above 1.36 and did not seem that nefarious, but at the end of the week it jumped higher almost toward the 1.38 top of the range.

It fell against other currencies as well. Did weaker sentiment numbers cause this? It is hard to say. Sentiment is so vaporous, and it often does not translate into what consumers actually do. It is hard to say that it was the reason the dollar sold, particularly when retail sales for February came out better than expected.

This is something we will have to watch because the dollar is correcting after a good run. That is normal, and it is still in a normal range, so it is not out of hand. It is concerning to see such a significant drop in one session, but it can happen and still recover, no problem. I want to see if it slows down or if the pressure stays on next week.

Source: MarketFN.com

[winston]

The dollar started the breakout of its four-week consolidation. It looked dicey during the week, moved up, held its support at the 50 day EMA and another price support, and then it bounced on Thursday and Friday.

There was good, strong volume, and it pushed it back below 1.36 Euros (1.3537 Euros versus 1.3609 Thursday). The dollar flirted with the 1.38 level earlier in the week as it sold off sharply, but it held the range and has now moved below that 1.36-1.38 range that has held it in check.

With this break higher, it looks as if it is ready to move more to the upside and will continue to drive below 1.36 Euros and higher against the basket of currencies.


Source: Market FN.com

[winston]

New Leg Up For the Dollar?

After trading sideways for much of the last two months, the US Dollar index successfully tested its 50-day moving average last week and looks to be in the early stages of a new leg higher.

While Europe has its fair share of problems, it's still hard to believe that the US dollar can rally even as the Federal government faces higher borrowing costs than Warren Buffett.


http://www.bespokeinvest.com/thinkbig/2 ... ollar.html

[winston]

Porter Stansberry: This looming gov't expense will crush the dollar
From Porter Stansberry in the S&A Digest:

The [government debt problem] isn't unique to America. It's happening all over the Western world. Nearly every single major nation – the so-called G7 – will have debt-to-GDP ratios that exceed 100% by 2014. The exceptions are Canada and Germany – at least if Germany decides not to bail out Greece, Spain, Portugal, and Italy.

The problem is, once creditors begin to fear more and more paper will simply be printed to pay these debts (and, of course, that's what will happen), interest rates will rise. And they could rise suddenly. That would force governments to spend vastly more money on interest payments than they expect.

That's the big problem right now in Greece, for example.

I believe the U.S. will be spending close to 25% of its income tax receipts on interest by 2015. That's simply not sustainable.

Sooner or later, something will have to give... whether that's taxpayers abandoning the country or the government vastly expanding the tax base. The same will be true for just about every other major Western country.

It won't just be the Greeks rioting in the streets.

People here, just like over there, have gotten used to getting something for nothing. And they're going to be very angry when the gravy train comes to an end.

[winston]

US Dollar Breaks Out

As shown in the chart below, the US Dollar index staged a significant breakout today.

This comes at the same time that US stocks have been hitting new 52-week highs as well. This is something investors haven't seen in quite awhile.

http://www.bespokeinvest.com/thinkbig/2 ... s-out.html

[winston]

The dollar had a spectacular week with huge gains on Wednesday and another surge Thursday that clearly broke it out of its consolidation and took it to a new rally high. Perhaps it had too much success during the week because it did sell back against the Euro and other currencies ahead of the weekend.

It probably had something to do with the great European plan that was put in place, but the dollar was a bit overbought in the near term (1.3413 Euro versus 1.382 Thursday). This was a week that saw the dollar trade solidly below the key 1.35 Euro level. It was trying to hold 1.34-1.35 and was smashed, but the other currencies did recover some to end the week (again, just likely due to the dollar's success).

Nothing indicates this with change anytime soon. The EU put in a punting play, but that is not really a plan. It is just ready to move in case Greece cannot get its own house in order. There are still the other PIIGS to worry about, including the UK. This is definitely not the end of the dollar's strength against the Euro. This is a giveback on Friday ahead of the weekend after a strong week.


Source: MarketFN.com

[kennynah]

/DX has a key resistance at ~82.. it is currently at 81.444

2 weeks ago, /DX broke out of 82 momentarily but failed to continue with its upward push... last week, /DX came close at 81.94 but turned down yet again...

if the unemployment data released last Fri is positively met by market players, this week may see /DX reaching new heights for 2010, beating the 82.52 recorded a fortnight ago... the danger though is that weekly stochastic has been in overbought condition since mid Feb2010... however, as many have pointed out, stoch reading can stay in overbought and oversold region for extended period of time..

it is now exciting in that different players will view this opportunity differently... some clearly will be looking for a Short setup when /DX reaches 82 region...while others will look for a convincing break up of 82 resistance for a swing/position trade...

footnote : /DX (Dollar Index) is a measurement of USD against a basket of major currencies; namely, EUR, JPY(yen), GBP(pounds), CAD (canadian), CHF (swisss francs) and SEK (swedish krones)

[winston]

US Dollar - Weekend Review

After having one of its best weeks in a long time, the dollar gave a lot of it back this week. It tried to make a surge on Thursday, but it just was not happening. It was not the dollar's week, and it finished down once more (1.3585 Euro versus 1.3510 Wednesday). It had broken below 1.35 and was trading easily in the 1.34 range, but it was not able to make that move stick and is now back down.

It is still in this range of support and above the trendline it started after breaking the long downtrend. I do not expect the dollar to break down; I expect an improving economy to continue to bolster the dollar. It has had a long downtrend. It is still in a recovery mode and is not showing a lot of wear and tear.

It is surprising that it came back to test so immediately after this nice consolidation that matches the initial consolidation when the trend was broken. Strong surge, sold back, but it is still in a flag pattern. It looks like it could give dollar traders a point to enter on a move back up over the upper range line, or maybe all the way the peaks from March.

The dollar is not in serious trouble but just had a tough week. Other currencies such as the Euro are doing better because there was better news coming out of the EU. There was no dire news out with respect to Greece, Spain, Portugal, Italy, Ireland, or the UK. I still expect the dollar to move higher.


Source: MarketFN.com