There is a big difference between THE bottom of the US$, and A bottom in the US$. I see nothing, at the time of writing, to indicate that the US$ has 'bottomed' on either a Medium or a Long-term basis. There is no sign as yet of 'running key day' or running key week reversal on the bar charts, nor, more importantly, the trend acceleration that typically precedes a major market reversal. A Medium-term reversal [loosely defined as 3 weeks to 3 months] could in my view easily see a correction in the Eur/US$ of 500 or 600 basis points. However, as 40% of the total price travelled within a trend cycle is typically completed within the final 5% of the life of the trend, my feeling is that there is at least another 15 big figures [1500 basis points] potential on the upside in the Eur/US$ [1.3850 -1.4000] and roughly the same in the Cable [1.9200 -1.9350].
us $ bottom
- Thread starter Free Thinker
- Start date
I generally agree with Howard. Major trends rarely end with the sort of action we are seeing now. Think of how bearish sentiment on the Euro was when it was trading in the 0.80s. We need to see that kind of level of give up on the dollar before it is likely to bottom IMO.
Not all major price trends end with large blowoff moves - an alternative is for the market to simply "die a death" and range around at low levels with very little buying interest. Examples would include the bottom in the Euro around 0.83, Gold around $250, and the Nikkei earlier this year. However, I think the dollar is a good candidate for a "blowoff" due to the huge purchases by Asian central banks - if this buying stops or even slows, then the last prop to the dollar will disappear and there would be a selling stampede. Also, the US government is deliberately trying to talk down the dollar and even pressure other countries to let it devalue. Typically when this happens, the currency goes way further than what the politicians are comfortable with.
A final factor is that the decline has been relatively orderly so far. It is rare for a major trend to finish without there being disorderly or panicky trading at some point near the end of the move. Personally I think we will see much more "shocking" trading - like 5+ points down in one day, or a major attempt by the Fed to defend the currency - before this bear market is over.
Not all major price trends end with large blowoff moves - an alternative is for the market to simply "die a death" and range around at low levels with very little buying interest. Examples would include the bottom in the Euro around 0.83, Gold around $250, and the Nikkei earlier this year. However, I think the dollar is a good candidate for a "blowoff" due to the huge purchases by Asian central banks - if this buying stops or even slows, then the last prop to the dollar will disappear and there would be a selling stampede. Also, the US government is deliberately trying to talk down the dollar and even pressure other countries to let it devalue. Typically when this happens, the currency goes way further than what the politicians are comfortable with.
A final factor is that the decline has been relatively orderly so far. It is rare for a major trend to finish without there being disorderly or panicky trading at some point near the end of the move. Personally I think we will see much more "shocking" trading - like 5+ points down in one day, or a major attempt by the Fed to defend the currency - before this bear market is over.
All very plausible - but the $CRB, Canadian dollar, British Pound all look extremely vulnerable here; a USD rally to .93+ would shake Gold and probably Crude significantly. Definitely worth playing the Gold Majors short. Many other opportunities if USD begins to show signs of turning this week.
We don't know how much cooperation there is between the U.S. and those big Dollar holders; they all are aware of the potential for catastrophe and will try to avert it.
Also, competitive currencies devaluations may mask the gathering pressure for dramatic commodities valuations adjustments for a while longer. A USD rally is quite possible here, given that other currencies are essentially just paper too.
