USD 02 (Oct 09 - Sep 10)

[winston]

The Most Popular Trade Today Is Ready to Capsize By Jeff Clark

All of a sudden, everyone loves the dollar.

It was only a few short months ago when the entire world despised the greenback. The euro was the currency of choice. And the favored trade was to be long the dollar and short the euro.

My, how times have changed.

The U.S. dollar index (USD) has been rising for six months and is 16% higher than when I first warned of an impending dollar rally back in September. Calling for a rally back then was easy. Sentiment toward the dollar was so bearish, and the anti-dollar trade was so crowded, the market was destined to go the other way.

That's how the market works. It coaxes everyone over to one side of the boat and then tips it over.

Today, it's the long-dollar trade that looks ready to capsize.

No one is bearish on the dollar anymore. Why should they be? After all, Portugal, Italy, Greece, and Spain are teetering on the edge of bankruptcy. Germany is withdrawing its support for IMF and European Union bailouts. And the euro appears ready to implode.

The U.S. dollar, in spite of the banana republic hijinks of our Federal Reserve Board, is once again a safe haven for what's left of the world's wealth. The most popular trade today is to be long the dollar and short the euro.

But if you're hanging out on that side of the boat, you might want to grab a lifejacket.

Take a look at this chart...

The dollar has rallied all the way back to the high it established during the financial panic in early 2009.

In doing so, it has traced out a bearish rising-wedge pattern (in red) – which is the exact opposite of the bullish falling-wedge pattern (in blue) that warned us of the impending rally.

Charts usually break out to the upside of falling-wedge patterns. And they break to the downside from rising wedges.

This looks bearish to me.

If you've profited off the long-dollar trade, congratulations. Now, however, it's probably time to grab something that goes up when the dollar goes down and head over to the other side of the boat.

A nice big chunk of gold or maybe a barrel or two of oil sounds good to me.

http://www.growthstockwire.com/

[kennynah]

it's a bit late to fall in love with the dollar...unless you don't mind second, third, fourth hand stock...

[winston]

How to Play the Dollar's Reversal

It's worth noting here that this wager against the U.S. dollar should be viewed for just what it is - a highly speculative trade. This means it's only for aggressive traders.

Keep in mind, too, that the dollar won't shed its reputation as the currency of last resort without a struggle. Negative events abroad could send investors back into the currency for short stretches, making the dollar prone to short, rapid increases in value, despite its highly flawed underpinnings.

Position traders and everyday investors will probably want to wait for confirmation that the dollar's trend is, indeed, reversing. We've seen some of that in the past two days but more is probably on the way. You'll miss out on some returns but that's the way the game is played - you have to act on your convictions or else you're simply another wannabe in this business.

My suggestion is that any speculative trade be limited to 2% of investable capital. That way, if we're wrong and the dollar doesn't cooperate, the risk to your portfolio is minimized.

As for suitable ways to play this dour-dollar prediction, I can think of three:

1. Go for the Gold: This is so obvious that I'm almost deterred from suggesting it, especially since the yellow metal is once again trading near its all-time highs. Generally speaking, I don't like buying anything at all-time highs, meaning that pullbacks are the key here.

I expect $2,000-an-ounce gold within the next couple of years - and possibly sooner - depending on how central bankers choose to deal with the EU and how the U.S. Federal Reserve handles the recovery bailout "exit" strategies it's alluded to in recent months.


2. Take "The Natural" Approach: By "natural approach," I'm referring, of course, to natural resources. The BP situation - coupled with new drilling restrictions and increasing Third World demand - is going to push the price of oil and other resources much higher. It's not clear which one pulls or pushes lately - the U.S. dollar or oil - but when one moves the other generally heads in the opposite direction immediately.

So watch the relationship between the two carefully to spot when this trend gets under way. Be prepared for some volatile trading, though. Silver, gold and other resources can move 5%, 8% and even 10% in a single day.


3. Cash in on Currency Funds: It used to be that the dollar and the euro were the world currency market's "dynamic duo" - when one went, you could count on trading the other. But I think that relationship is long gone.

The money has now shifted across the Atlantic, headed through the U.S. economy, and headed straight for Asia. As a result, instead of shorting the euro, I'm now inclined to short the dollar, while being generally long on the Hong Kong dollar, the Australian dollar and even the Chinese yuan.

http://moneymorning.com/2010/06/10/u.s.-dollar/

[winston]

Weekly Review

Dollar. The dollar did see an advance, though it closed off its high on the session compared to other currencies (1.2098 Euros versus 1.2124 Thursday). The dollar is off its highs which saw it break below 1.2 Euros.

I doubt we have seen the last of a sub-1.2 dollar on this move, however. The DXY0 pulled back modestly after bumping into the late 2008/early 2009 peaks, holding the 18 day EMA on the low and starting to bounce on Friday.

Likely this is just another normal pullback to near support and its move higher. It is measuring the move to break out above that prior high.

Source: MarketFN.com

[winston]

Weekly Review

The DXY0 closed flat on Friday (1.2388 Euros versus 1.2385 Thursday) but continues a two-week trend lower which is testing the strong move from April into late May and early June. It has come back for a couple of weeks to test as the European worries have died down.

As I said, it is a situation where the news is so bad that it cannot continue to come out as negative. Once investors become inured to the story, it does not affect them until something major happens again.

The dollar continues to test back after its sharp last leg in the rally, but it is not in any danger of breaking down. It is still above the 50 day EMA.

It is in a very orderly pullback and coming back to a support level from late April and early May. A high and a low. This will be the most important level near term for the dollar to test.

Source: MarketFN.com

[millionairemind]

Global markets fear US Treasuries sell-off as China ends currency freeze
Global markets are braced for a possible sell-off in US Treasury bonds after China said over the weekend that it will allow the yuan exchange rate to adjust against the dollar, ending a two-year currency freeze that has led to trade clashes with Washington and Brussels.

By Ambrose Evans-Pritchard
Published: 11:34PM BST 20 Jun 2010

http://www.telegraph.co.uk/finance/econ ... reeze.html

[winston]

Weekly Review

Dollar. The dollar was down modestly on Friday (1.2387 Euros versus 1.2328 Thursday). It is holding over the 50 day EMA. It bounced off it early in the week and then faded back as the week went on.

There seems to be a perception that either Europe is getting stronger so the dollar is not the necessary safe haven that it has been.

Nonetheless, it is still quite solid in its uptrend, and this 50 day EMA test is a normal test before a continuing move higher.

Source: MarketFN.com

[winston]

Dollar Bulls Retreating From Bets Against Euro By Don Miller, Money Morning

The biggest surge in the value of the U.S. dollar since 2005 appears to be waning, as traders retreat from bets against the euro and other currencies.

Futures traders at the Chicago Mercantile Exchange are in the process of unwinding record bets that the dollar will rally against other currencies.

The number of contracts hedge funds and other large speculators hold betting on a rise in the dollar versus other currencies declined by 70% to 49,335 in the week ended June 22 from a June 8 peak of 163,085, according to an analysis of Commodity Futures Trading Commission data conducted by Bloomberg News.

With concern that Europe's fiscal crisis will cause a nation to default easing, the Dollar Index - which measures the currency against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona - is down 3.5% since June 7.

Money Morning Chief Financial Strategist Keith Fitz-Gerald thinks there may be an opportunity to cash in on the dollar's recent weakness in view of the increasing flows of capital into Asian markets.

"The money has now shifted across the Atlantic, headed through the U.S. economy, and headed straight for Asia. As a result, instead of shorting the euro, I'm now inclined to short the dollar, while being generally long on the Hong Kong dollar, the Australian dollar and even the Chinese yuan," Fitz-Gerald wrote in a recent article.

http://moneymorning.com/2010/06/29/us-dollar-2/

[kennynah]

Listen to these articles n lose money... They are slow n report the after the facts... Good luck to whoever who follows these gurus

[winston]

Dollar Bulls Retreating From Bets Against Euro By Don Miller, Money Morning

instead of shorting the euro, I'm now inclined to short the dollar, while being generally long on the Hong Kong dollar, the Australian dollar and even the Chinese yuan," Fitz-Gerald wrote in a recent article.

How can one be short the USD and long the HK Dollar ? The HK Dollar is pegged to the USD.

Am I missing something ? Or do you know what you are writing ?