Matt Blackman

President-Elect Obama and the U.S. Dollar

Interesting analysis. It is certainly not technically based. You mention that jobs losses are a lagging indicator - with very few exceptions all fundamental indicators lag. But your average number of jobs losses per month is wrong, the actual number is 93,900 (see chart 2 at tradesystemguru.com/co...). Also not sure about what you mean about some of the secondary statistics showing improvement. The latest ISM number of 38.7 is well below the contraction threshold and the lowest reading in more than 2 decades (see chart 1 at tradesystemguru.com/co... ) .

Another major challenge facing any sustained dollar rally is the deficit. If it soars to or above $1 trillion as projected, who is going to buy US Treasuries in sufficient amounts to finance it? Right now Treasury needs to sell more than $30 billion per month just to pay the roughly $400 billion annual deficit. That number will soar to above $80 billion/month in 2009 (based on the cost of the current crisis and Obama fiscal promises) and as you can see from the latest Net Treasure Income Flows, they are having trouble doing that now (see tradesystemguru.com/co... ).

I also agree with the above poster. At this point, who is in the White House is relatively unimportant for the time being. But if he follows through on his many promises, most of which are pro-tax & spend and anti-business, it will mean any recovery will take considerably longer to take effect.

Maybe the dollar will continue to rally from here but your article did little to explain how. With a target rate of 1% (with an effective fed funds rate of 0.30%) the US has the lowest interest rates of any OECD country with the exception of Japan and will bring that rate to zero based on the strategy in Washington.