Goldman Calls a Bottom in the Dollar

Dollar strength will not be a straight line..... nevertheless, dollar lows are almost certainly behind us. - “Calling A Bottom In The Dollar”, Goldman Sachs

... the euro ‘rubber band’ is stretched as far as it’s ever been stretched.  That means expect a rise in the dollar, and a fall in the euro. - Steve Sjuggerud, “The Best Speculation In The World Right Now”, Daily Wealth, August 8, 2008

There are really two big stories in financial markets right now and they’re related: oil weakness and dollar strength.  That’s driving everything right now - including the powerful stock market rally over the last 2 weeks.

Goldman Sachs has issued a report titled “Calling A Bottom In The Dollar” that resulted in a continued surge of the dollar against the euro - from $1.55 in the middle of last week to $1.48 yesterday.  That’s a 4.5%, 1 week move - a huge move for currency markets.

I’ve called the top in the Euro vs. $ twice before this year:

“Looks Like A Top In The Euro”, Top Gun FP, February 7, 2008

“Front Page WSJ Article On Bernanke’s Speech Yesterday”, Top Gun FP , June 4, 2008

I’m calling it for a third time: the dollar low versus the euro is in!!!!

This is an important development for financial markets.

Comments

[Balderdash:]

You called a bear market bounce. Want a cookie?

2008 Aug 15 06:51 PM

[Matt from Q...:]

I wouldn't be to proud of that February call if I were you. EUR/USD closed at 1.48 back then and it did nothing from that point but go straight to 1.60.

2008 Aug 16 09:32 AM

[lblaine:]

The dollar will likely strengthen over the next several months. This is a normal retracing in a overall downward trend. The de-leveraging in the credit markets (CDOs, SIVs, etc. ) over the next year will precipitate the failure of many banks and hedge funds. There will be a flight to the "quality" of US Treasuries, creating high demand for the US$.

2008 Aug 16 10:55 AM

[NOWHEREMAN:]

There may be a flight to safety but definitely not to quality. The dollar may have bottomed but not because of the Fed or Treasury, rather because of Putin. The War Premium has returned.

On the other hand, the strenght of the Dollar combined with the perceived EuroZone weakness will destroy the Internaltional Market earnings currently proping up the S&P. Its not only a matter of sales but of currency conversion.

Meanwhile, the 4.5% drop means inflation in Europe has just jumped. They are less likely to lower interest rates any time soon since fighting inflation is their only function.

Core inflation in the US also hit a speed bump. The Minimum Wage, phase 1 has just kicked in for the world's largest union, the minimum wage worker. There is no Light to be seen in the Tunnel. More and more "problems" are surfacing for the Financials and they are being forced to sell more and more assets into an already depressed market.

A stronger dollar because of War is not something to be wished for.

2008 Aug 16 11:38 AM

[thecondoguy1:]

this is terrific, sounds like there will be no more need for oil, corn, soy, copper, zinc, etc., this is great, we're gonna be OK........

2008 Aug 16 02:15 PM

[User 30121:]

What a f...ing crock! Wait (8-10 weeks) when oil will AGAIN be in the 140s, and gold will be in the mid-900s, and your PRECIOUS dollar will be (where it belongs) in the two-holer!

You see, you have forgotten Israel-Iran, and God-forbid Obama winning, and the on-going Russia vs.everyone else in Europe saga. Then, of course, there is the dismantling of the US economy by the brainless wonders in the Fed and Treasury.

I, personally, have been buying (and take physical possession) of gold and silver all the way down--as far as it goes--UNTIL the uptick starts...then (you) rats will start jumping off the USS Dollar!!!!!!!

2008 Aug 16 05:29 PM

[NOWHEREMAN:]

Agreed

2008 Aug 17 04:51 AM

[NOWHEREMAN:]

I don't really follow silver,but Gold, oil will move with the dollar to the upside with the Israeli nuc strike which will probably occur before Bush leaves office, but may occur in the Middle of Oct. in an attempt to influence the US election. Isreal can't afford to have Obama as president when they do it.

2008 Aug 28 06:00 PM