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Is The US Dollar Crashing?
Since
mid-August, the market has become overrun with inflation expectations on
beliefs that a massive QE 2 program is in the works. With economic data worsening,
the US recovery proven to be the joke it was all along, and stocks close to
falling off a cliff, Wall Street has fallen back on the mantra that has guided
stocks for the last 18 months: the Fed
will save the day.
This took
the form of planting stories in the media, pushing research reports that
claimed QE 2 was just around the corner (Morgan Stanley and Goldman Sachs) and
other propaganda-esque tactics. So when the Fed announced that it would issue
its QE lite program in mid-August, the world took this to indicate that QE 2
was definitely coming.
Indeed,
virtually EVERYTHING occurring in the financial markets right now can be traced
to the view that the US Federal Reserve has a $1 trillion+ QE 2 program on
deck. Nowhere is this clearer than the US Dollar.
As you can
see, August marked the beginning of a very ugly sell off for the US Dollar. The
US currency was rejected multiple times by its 50-DMA and has now broken below
its 200-DMA AND critical support at 80:
As the above
chart shows, 80 has served as a line of major support during the last 20 years.
Indeed, we’ve only been below this level three times (once in 92, the 2008 low,
and again in 2009 during QE 1).
This is a
MAJOR warning sign that the markets have begun to price in the potential for a
major inflationary event. The issue now is whether or not the markets are
correct in this forecast or are simply ramping due to Wall Street expectations
(more on this in a moment).
How far will
it fall? From a technical perspective, the US Dollar’s drop triggered a Head
and Shoulders pattern than targets 72-73.
However,
we’re already oversold with an RSI at 30. Moreover, there is support at 78 and
77 as well as the trend line from the Dollar’s other two bottoms in 2008 and
2009, which is around 76.
This is
something of a trade-less situation at the moment. The US Dollar should bounce here given its oversold
status and how bearish sentiment is. However, the downtrend is strong and the
H&S pattern does need to be respected.
Keep your
eyes on the Dollar. Given how lopsided the inflation trade has become, a
breakout to the upside or downside will determine the moves for most major
assets.
Good
Investing!
Graham
Summers
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QE2 by any other name still stinks as much. I don't understand the people here saying there will not be a QE2. Have you seen the US budget? If the fed doesn't buy the US debt who will? No one, that is who. If the Fed doesn't buy it for as long as they can get away with it, the treasuries market will crash. It's going to crash anyway, but they are going to try to delay it as long as possible by monetizing the debt.
They have no other choice. And yes it will end badly and the dollar is doomed (along with every other fiat currency).
QE2 isn't about stopping deflation or saving banks, it's about keeping the system going on life support until it totally crashes hyper-inflation style.
Can't say I disagree. But who doesn't think that the international banks and central banks aren't asking "What comes next?" Having seen the breakdown of the FRN reserve currency role, aren't there offline conversations about the next system?
Several ZH'ers have applied some first-order scenario- perhaps conspiracy - planning models about solutions to the mess which always seem to be totalitarian. I think that is a form of reverse-utopianism, Orwell and Huxley held aside for the moment. The grain shortfall in Russia may rebase grain/petroleum ratios or just be outright deflationary. Can't help but see parallels to the USA dustbowl and Russia today, resulting in agriculture becoming more concentrated.
Maybe the newest world reordering will include a taxcode in the USA that doesn't screw the middle class out of a future. In order for that happy event to occur, make sure your kind of Senator and Rep in Congress is getting elected as seats come up. Own gold and vote accordingly, for as long as that systems holds up.
Retracement to the 72-75 level seems plausible, but so does a spike into the high 80's. There is really no clarity other than that narrow channel seems to rule the day in all markets, period.
Lets not bail out the banks that went heavily short USD this time.
What? You don't approve of printed, paper prosperity?
again "you focus on what's going down not what's going up." precious metals are soaring...which means straight up "the markets are calling out Ben Bernanke." Whatever you think "theoretically" policy makers have jobs to do. Ben Bernanke's "et al's" have said publicly "we're not going to do our job" so "na-ner-na-ner boo-boo." Well opposing them "are people with money and they're saying we have to come to work and do our job or we get fired" so "here it comes." And while a agree with Mr. Keene that "we are not at war" ala WWII--we could very well be plunging into "an accidental one." Lest we forget WWI was started by the murder of an Arch duke so "let us not poo-poo accidental wars." More to the point "let us not poo-poo exceedingly smart and exceedingly capable people who decide to quit."
Weeeeeeeeeeeeeeee!!!!!!!!!!!!!!!!
If you are gonna go off the cliff anyway, why not go in fifth gear with your hair on fire?
Why do QEII when just talking about it has the same affect?
I sure hope so. If the dollar were to go to .30 I could make up all the losses I have on my house declination in value, the errors made going short the stock market, and the bad timing on gold buying.
So therefore, It will never crash.
It looks like the sell- dollar is a bit overdone.
QE 1.0 did not do in the dollar and QE 2.0 (if it happens) won't, either.
Dollar/crude is worrying as $82 crude triggered a sell- off a couple of months ago. $87 (Nymex) is the key but a key to what, exactly?
A 'resistance level' suggests that crude prices exist only within a particular finance market. In the real world, + $87 represents a business cardiac infarction. There is no empty 'price spike' when the item at issue is the lifeblood of commerce, itself.
What is taking place is Bernanke v. Nature. So far the contest is Nature - 4 (or 5 or so), Bernanke - 0. He should quit while he's still 'ahead'. That is, his reputation is still intact.
Regardless of what happens in the very short term, the prices across all markets will decline. If oil prices spike - +$90 - the outcome will be a demand- driven crash of all assets across the board including crude prices. In the real world, businesses cannot afford high priced fuel. The bigger the spike the greater the crash. All assets will crash including gold.
The crude market is small enough when speculators climb aboard the price moves can escape the natural mechanism that causes spare petroleum demand to flow onto the market and depress the price. Some spare capacity will be stored offshore on tankers, some will be held off the market for even higher prices. At that point the actual shortage of fuel in the energy markets will be self- reinforcing. + $100 oil could cause a retest of 2008 highs ... and an even greater crash than the 2009 version.
Planet Bernanke and the world's traders are playing with fire. If a crash takes place the central bankers will have few tools left to deploy. The weak links are spread throughout the entire finance universe across national borders. Once debt markets are infected and credit freezes the rickety finance structures will implode. Unlike in 2009, (more) cheap credit and extend- pretend will be useless.
This takes place against the backdrop of ongoing peak oil. Yeah, it's a 'theory' all right! Subscribed to by the Defense Department, the British government, the Bundeswehr, Lloyd's and ... of course ... Saudi Arabia, Iran, Kuwait, and the rest of OPEC, not to mention most if not all energy traders.
If oil prices cause a crash the outcome will be dollar/debt deflation. The dollar may be 'crashing' today, but what about tomorrow? Watch that oil market. In any deflation then dollar rules.
Actual dollar deflation is nothing but the fantasy of clueless Keynesian academics and their status-quo defending collaborators. It will NEVER happen! Fiat is trash ---- always has been, always will be, and NEVER, ever appreciates in value. There is not one historical example of such that you can point to ---- and HUNDREDS, if not thousands, of examples that I can point to of fiat currencies continually trending to their true value, zero --- in fact, every example of fiat currency throughout history, including our own current one.
Bruce Krastig pointed out to you on one of his posts that the Yen had appreciated at a 6% rate per annuam since 1989 I believe...willful ignorance?
Jdrose, that is patently untrue. Perhaps the yen has appreciated in US Dollar Index terms, but as we all know, the dollar index is NOT an absolute measure of the US dollar, or any currency within it or measured against it, but is only a relative measure of one (depreciating) fiat currency against another. Anyone who tries to use it to measure the true "value" of any currency is either clueless or disingenuous.
agaisnt what? other fiat? does that count? how has it done against gold?
Seems to me that there is a little too much rumor. How will they fleece us if they tell us the truth about what they intend to do? Right about the time we capitulate and buy gold… well, you know what’ll happen.
http://www.stungunstopepperspray.com/
Chartology seems pointless in a totally fucked up market.
Unprecedented.
The problem is that we are dealing with True Believers here. Ben and Turbo Tax Timmy are hooked on neo-Keynesian Kool-Aid and may actually be Krugmanesque in their delusion. For a few dollars more . . .
i've heard that if you add up all the USDs in the world you can fill up 1339 olympic swimming pools.
Or 12 toxic waste dumps.
Or 5 Chernobyl nuclear reactors.
Or the collective empty craniums of the CNBC talking puppet crew.
flagged for greatness +1000
I dont believe Q/E2 is coming. Sure they talk about it a lot, hype for hypes sake and never in history has everything gotten such mileage about a rumour 'Hooray! The FED will save the day!' as this present Q/E rumor mongering cycle. Q/E2 would be the end of it all, dollar would collapse, gold would skyrocket, and stocks well who cares its an empty casino.
How can they possibly sell qe2 to the public. All asset classes go staight up as it is.
EVer heard of language deconstruction?
They will not call it QE2 or anything remotely like it. It will however they design it, not need to be sold. The public didn't buy their sale of it last time 2/3 opposed it, but Hank,Timmay and Ben didn't give one good goddamn whether they bought it or not. They simply told the Henchpersons in CONgress do it or else.
They'll do it all right and those who benefit mightily from it will see to it.
PAging Joe Cassano! PAging Dickie Fuld! PAging Lord Blankfeind!
The dollar will recover. If the FED bombs the dollar with QE2, Europe will do the same, as will do so many others.
The dollar will be the last fiat currency standing. The Yen and Euro are in at least as much trouble.
However, they will all continue to lose ground to PMs.
+1
if this is the case, it will not recover relative to gold.
The US Dollar, technically the Federal Reserve Debt Note, is NOT crashing. It is simply finding it's intrinsic value. As history has proven time and time again, all FIAT currencies do this. This is true with the first USA central banking scheme, the second USA central bank, and now with the USA's third central banker (the Federal Reserve this time around).
fiat currency, outside the value of the cloth it is printed on, is virtually a bubble by definition.
Like saying the game of Russian roulette can technically go on and on...never the case at all as on the 3rd or 4th shot someones head gets blown off. Way overdue, and the dollar WONT recover, the game is 1 world currency, 1 world govt. Pay attention to macro political events it will save you a lot of pain.