Picture This: Currency Trends

While the US Dollar has been strong of late, there is a disturbing divergence that is going on between the rising uptrend on the chart and the negative sloping relative strength index (RSI). There’s no question this is still a bullish chart, but it’s wise to pay attention to the relative strength of a move and this one is clearly losing steam. There is still a bullish symmetrical triangle in play, and if it does break out it will have problems at resistance around $88, where I look for it to put in a double top, if it even makes it out of the triangle.

The Yen has a much better set of cycles where it goes up, then pulls back orderly and then continues to move higher. There doesn’t seem to be anything wrong with this chart technically that will prevent it from reaching its old highs,as long as it keeps setting higher highs and higher lows.

Comments

[Greg Pinelli:]

There's always some quiet tipping point that in retrospect points to when these very suspicious charts dive...For the dollar it may be cloaked in the positive news that more bailout money is working its way thru to end users and the economy..In other words..I wonder if the first signs that the liquidity machine is revving up might not be some very bad news longer term for the buck?

2008 Nov 08 12:02 PM

[whidbey:]

Good analysis of the technical setup.

The longer range projection is difficult. The fundamentals may not to support a dollar decline. With acknowledged monetizing of the US debt it seems likely that rates rise and foreign buyers, all else equal, come in. Can we expect that higher interest rates on debt will increase dollar demand? For a while maybe it will, but when the exchange losses equal the yield gains, the dollar is less desirable . We have a problem as the government struggles to fund its programs which will fundamentally make the USD less valuable.

2008 Nov 08 01:34 PM

[jepittman:]

This is interesting to me because the dollar has been rising on a 'flight to safety' shift brought on by the credit crisis. A topping out of the dollar may represent evidence that the hedge fund delevering and risk flight may be finally exausting itself. When this occurs it may mark the bottom of this asset price decline.

2008 Nov 09 11:26 AM

[NOWHEREMAN:]

An end to the hedge fund repatriation is due next week. Next installment would be next year if they are still underperforming. Mutual Fund repatriation should also slow appreciably by the end of November, early December as will tax loss selling.

The end of repatriation will spell the end of the dollar's rise. How far down it goes will depend on the extent of the Stimulus Package and which programs Obama presents as being priority bills.

The October 10th lows on the DOW and S&P were not violated on October 24th. The NYSE made a new 52 week low, down almost exactly 50% from its 52 week high. The BKX has held above its lows, this is no longer a viable index, some major tenants have been removed entirely.

2008 Nov 09 11:53 AM

[Urbane Gori...:]

You'd think the devaluation of other currencies would punish the dollar. After all, we don;t have that much further to devalue, whereas other currencies still can move down quite a lot comparatively.

China has just announced a massive $600 Billion 2 year stimulus package. (Massive in comparison to their economic size vs the US.) .. Even though they have problems that we don;t seem to address here in the US, they still have us beat for GDP growth and they actually do have an internal market and are reaching out mutually to many other economies. (Just take a look at their recent ties with Russia)...

Jim Rogers says he is the worse market timer. Maybe he finally has it right.

jegan ;-)

2008 Nov 09 04:08 PM

[Asbytec:]

In my view, the dollar has to strengthen further into 2009. I imagine it's much more difficult to get a read on trends during volatile times. So...

First, as mentioned, the hedge funds will probably continue to pay out in dollars well into next year. What's the estimate on the pay out, $1.7 trillion? The bail out package is less than half that, and much of the bail out might not directed to help hedge funds.

Second, with jammed credit markets, trade is winding down. Less dollars are finding their way into the forex.

Third, the MBS failure is drying up global liquidity, including the dollar, despite Fed liquidity injections. As the dollar disappears, demand for it should increase. Inflation is already projected to fall across the globe.

And, forth, dollar based safe havens do seem to be in demand as the world edges into recession or worse.

I am bullish on the dollar through 2009 and fully realize I may lose my shirt. I just pray I am right.

2008 Nov 09 07:44 PM

[Greg Pinelli:]

It's impossible to fathom what paultaur means by "repatriation." That term refers to the movement of something held offshore to its national origin.
As usual from him..nonsense.
Currency strengthening or weaking is NOT the focus for the next 6 months...currencies will become increasingly unpredictable. Gold and silver will take over the status as the "dependable" touchstones. By Spring 2009 Gold will be at $1000..Silver at $17......currencies..p... be all over the map.

2008 Nov 09 08:50 PM

[Asbytec:]

Yea, repatriation is hard to define. Regardless, it should occur, if free trade is played in accordance with theory.

Obama claims to be a fair trade guy. Does this mean he can put pressure on China to reduce our trade deficit? I doubt it, other's have tried with little or no success in getting China to let it's currency float. But, one can hope.

As it stands, exports to China are too expensive and imports from China are too cheap. The Chinese like it that way and it'll probably stand. After all, they are a command economy with a free market interface. They do not play by free market rules which would repatriate dollars.

And, we're no angles either. We like cheap imports. We can just put them on our credit card. Well, when we had credit, we could. Credit drove he world economy, in my view. Something wrong with that picture. Global recession, or worse, is the result.

And, seems the world wants to get the credit markets unstuck so we can get back to business as usual. I believe the real bubble that burst is a credit bubble. It just burst in the mortgage markets, first.

2008 Nov 09 10:18 PM

[NOWHEREMAN:]

hmm, what the heck are: currencies..p...?

Keep talking out the side of your mouth and eventually no one will be able to understand you.

Spring of 2009, is that up to June 21st or just the beginning of spring? $1,000 gold, $17 dollar silver.

You make a prediction, I will track it for you.

If currencies are unpredictable, $1000 gold is unpredictable also. Come on Geo, quick, make another prediction on the course of the USD that will sustain $1000 gold or will Gold move in the same direction as the dollar?

My turn.

2008 Nov 10 12:55 AM