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The U.S. dollar! September 18, 2009
Being Street Smart
Sy Smith
LA U.S. DOLLAR! September 18, 2009.
The U.S. dollar fell to a minimum of 12 months against major currencies on Thursday, with most of the currency dealers believe it will continue its free fall. And basically, the dollar seems to have much going for it to reverse the trend.
World interest rates are at historic lows, but few as low as the minimum historical federal funds rate from 0 to 0.25% in the U.S. The key interest rate Central Bank Europe is also at historic lows, but at 1%. That creates lucrative opportunities for speculators to borrow dollars cheaply, and invest gains in higher-yielding assets elsewhere.
Further pressure on the dollar is coming from major trading partners U.S. Them are influenced by their exports in dollars, and if those dollars are decreasing in value, which tempts to sell dollars and buy other currencies.
While Thus, with a world commodity price in U.S. dollars, even from other countries, particularly oil-producing countries are unhappy with the dollar is the world's leading currency, and also pay with a currency that is declining in value.
So the pressure that began from China, Russia and Venezuela that have replaced the dollar as world currency by a "balance" basket "of currencies, is expanding. A few weeks, including the United Nations Conference on Trade and Development called for replacing the dollar with a "global" currency.
Also There is little incentive for U.S. to intervene in currency markets to support the dollar (as central banks often support their currencies when needed.) U.S. is struggling to emerge from a severe recession, and everything that makes foreign imports more expensive for U.S. consumers and U.S. exports less expensive for consumers in foreign countries, is a boost for the U.S. recovery economic.
So the U.S. as it has for the past ten years, talks a good talk about how it supports a strong dollar, but does nothing about the situation.
Fed Chairman Bernanke, perhaps inadvertently, prompted further plunge last week on the dollar when he declared that the U.S. recession has probably done technically, but that recovery will be Slow potential pitfalls on the road. That was taken by currency traders as an indication that the lowest interest rates in the U.S. will probably be in the place for quite some time, however, encourages currency traders to increase their sales to short the dollar.
But be careful to jump against the dollar at this time.
As with all movements of the market, after its big decline of easy money to be made by betting against the dollar has become the talk of the financial means to "sell the dollar, buy the Euro", the most popular advice of analysts.
However, with great benefits and if you used the smart money which came near the top in July, and trade that became popular in the late media time will most likely be seeing a reversal higher.
Here are two reasons why I think that a reversal of the rise may be close to the dollar.
investor sentiment against the dollar has become extremely one-sided, which must be professional currency traders on the edge of their seats ready to take profits. Bloomberg The dollar bullish sentiment index fell to 30.8 from a high of 68.86 last year, its lowest level since dropped to 30.3 in March 2008.
It is interesting to note that March 2008 marked the end of several years to sink the dollar since its peak in 2004. That low in March 2008 The dollar rose 25% to its peak in March this year. And here is the sentiment against the dollar back to the end of the downtrend.
My second reason to think an upward reversal in the dollar may be close is that in its decline, as I show in a table target = "_blank" title = "www.syhardingblog.com"> my blog daily markets, the dollar has become very oversold below its moving average of 30 weeks.
The long-term history is that its 30-weeks ma acts as a powerful magnet on the dollar. Every time in the past that the dollar was in a bull market and became overbought (More extended) above the ma, soon withdrew at least to retest support in the ma, even if it was then resume its bull market.
More important for the present situation is that every time in the past that the dollar was in serious decline and became oversold below their 30 ma weeks, soon began to recover a backup at least in the ma, but was destined to resume its decline later.
Given the current high level of short-selling of the dollar, reversals, unlike starts could result in short-sellers are forced to buy the part to close out positions in an unusual move, generates a quick change of ends and top.
So those are my reasons for believing that this is not a good time to take new positions in the "money easy "trade.
In addition, with other markets, including gold and the stock market as closely linked to the direction of the dollar, keeping a close watch on the dollar for a potential investment may be more important than seeing those other markets themselves.
Sy Smith is president Asset Management Research Corp., publishers of the financial website title = "www.streetsmartreport.com"> www.StreetSmartReport.com, and daily free blog market www.syhardingblog.com .
About the Author
Sy Harding is CEO of Asset Management Research Corp., author of 1999′s Riding the Bear and 2007′s Beat the Market the Easy Way, editor of www.StreetSmartReport.com, and www.SyHardingblog.com.
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