What's your view on the greenback?
Would You Buy Dollars Vs. the Euro?
- Thread starter Pa(b)st Prime
- Start date
If you view the thread than freakin' vote in the poll. Putzes!
What I want to know is why aren't other CBs jawboning USD higher and threatening rate cuts to smoke the USD bears. I'm sure even Iran and Argentina are sitting on a bunch of depriciating dollars and would want some relief from this unrelenting decline. And as for Europe, China, and Japan - a dollar collapse is death for their export based economy.
I doubt we see a bottem for the USD unless we make lower lows with some kind of momentum divergance that signals everyone has capitulated already and few sellers left.
If we get a V bottem there'll have to be a coordinated effort to jawbone and threaten it higher with hints of ECB rate cuts or actual cuts that blows the shorts out of the water. But that kind of manipulation doesn't change the long term fundemental outlook. And if would be interesting to see commodity price reaction if ECB cuts.
If we get a V bottem there'll have to be a coordinated effort to jawbone and threaten it higher with hints of ECB rate cuts or actual cuts that blows the shorts out of the water. But that kind of manipulation doesn't change the long term fundemental outlook. And if would be interesting to see commodity price reaction if ECB cuts.
My view is it needs to have a proper panic bottom/sentiment extreme before the major trend will reverse. The exception would be some kind of major fundamental change or central bank intervention campaign. The recent bear trend was kicked off by the Fed decision, and is in early days yet, it's no way near an extreme. The falling rates have to be fully discounted (or over-discounted) before a reversal IMO. Until then the greenback will probably get whacked.
However, longer-term I am beginning to see the formation of a possible secular low in the dollar. I would imagine that it will bottom when everything looks as bad as possible e.g.
US economy in recession or seen as near-certain to enter one
Fed having slashed rates significantly
Extreme bearish sentiment towards the dollar - stories in Business Week/Time front cover about the end of the greenback etc
Rapid price plunge
Retail mom & pops getting it totally wrong - cab drivers telling you they are opening forex accounts so they can short the dollar for "easy money"
"Veteran" investors start to anticipate a low for the dollar (usually they will be a bit early)
Dollar significantly undervalued on fundamentals (PPP-parity/Big Mac Index)
That's usually how multi-year trends end & reverse. We already have the beginnings of some of those factors, but I don't think it's there yet. However, when the low *does* occur, then the dollar rally could be truly powerful as almost no one will be betting on it. I think one plausible scenario is a move to around 1.50 late this year or early 2008, then a 6-12 month move up to 1.10 vs the Euro.
However, longer-term I am beginning to see the formation of a possible secular low in the dollar. I would imagine that it will bottom when everything looks as bad as possible e.g.
US economy in recession or seen as near-certain to enter one
Fed having slashed rates significantly
Extreme bearish sentiment towards the dollar - stories in Business Week/Time front cover about the end of the greenback etc
Rapid price plunge
Retail mom & pops getting it totally wrong - cab drivers telling you they are opening forex accounts so they can short the dollar for "easy money"
"Veteran" investors start to anticipate a low for the dollar (usually they will be a bit early)
Dollar significantly undervalued on fundamentals (PPP-parity/Big Mac Index)
That's usually how multi-year trends end & reverse. We already have the beginnings of some of those factors, but I don't think it's there yet. However, when the low *does* occur, then the dollar rally could be truly powerful as almost no one will be betting on it. I think one plausible scenario is a move to around 1.50 late this year or early 2008, then a 6-12 month move up to 1.10 vs the Euro.