What Lies In Store For The Dollar?
When it comes to the relative value of the dollar, the last decade has been an eerie recreation of the period from 1980 to the mid 90's. One notable observation is that while the secular bull market starting in 1980, which many are desperately trying to equate the current bear market/liquidity gusher/Keynesian circlejerk rally with, was accompanied with a 5 year long appreciation in the value of the dollar, things could not be more different now.
Also, if history indeed rhymes, look for the dollar to drop to the magical 70 level before we see both a near term rebound and another major swing up in the DXY to well north of 100 as the third iteration of the dollar cycle begins. Then again, never before has the dollar been the funding currency of choice. Which is why we tend to believe that while the downside is still in play, it will be limited, and once the trade inverts and everyone piles out of the burning dollar carry trade theater, the upswing could easily take out the 120 high reached in the last (red) cycle.
(2 votes)
on Wed, 11/25/2009 - 12:36
#142123
I'm a dollar bull and even I am not talking about 120 on the dxy.
on Wed, 11/25/2009 - 15:10
#142444
I'm a fan of volatility... and volatility is DEAD CHEAP, given the environment.
on Wed, 11/25/2009 - 12:37
#142127
"...the upswing could easily take out the 120 high reached in the last (red) cycle."
Sounds like a plan. That is the plan....right?
Right?
on Wed, 11/25/2009 - 12:46
#142147
Sooo...is joe six pack going to go to the ATM when the dollar spikes?
on Wed, 11/25/2009 - 12:56
#142166
right--volitility is great for the nimble traders---but the average joe always loses here and will be left holding all the paper...which is nothing but that---paper.....and poor joe will be the last to realize it is worth ZERO.
on Wed, 11/25/2009 - 13:09
#142190
The gold atm, maybe!
on Wed, 11/25/2009 - 12:50
#142154
It's all noise. Tell me when in all of history a fiat curreny has survived (such a calamity of this magnitude)... and I will sell my gold+silver and get long paper. You need to be asking yourself what type of world are we headed towards and how to prepare for such. That's the smart trade. ....Oh yeah, long seeds and gardening books too.
on Wed, 11/25/2009 - 13:39
#142253
When has any currency truly survived?
on Wed, 11/25/2009 - 13:39
#142256
When has any currency truly survived?
on Wed, 11/25/2009 - 12:56
#142168
"My prediction? Pain."
http://www.youtube.com/watch?v=Z1TxiVhrkZA
on Wed, 11/25/2009 - 13:02
#142177
Uh! It ain't April Fool's Day, so you must be playing us for turkeys, right?
on Wed, 11/25/2009 - 14:09
#142309
Tyler has been infected by the latest genetically engineered "Prechter-flu" developed by the US govt. which causes people to become dollar bulls and start buying them in large amounts.
on Wed, 11/25/2009 - 13:05
#142182
"magical 70 level". Right-on, I was thinking 68ish or so...
on Wed, 11/25/2009 - 13:08
#142188
So much for the contrarian "sentiment" of an imminent dollar rally. Another chapter in the annals of the Prechter coast as followers are dashed upon the rocks scrambling for any nugget of gold they can gather. To all that ascribe to the EW theory, I hope you are deeply capitalized to withstand your losses.
on Wed, 11/25/2009 - 13:11
#142195
Tyler Thanks for this post. I really needed a good laugh.
FUNNY!
on Wed, 11/25/2009 - 13:12
#142198
lol at CNBC pumping stocks as the dollar burns
like passngers singing on the Titanic
on Wed, 11/25/2009 - 13:15
#142202
Dxy @100?? What are you smoking bro?
on Wed, 11/25/2009 - 13:18
#142207
We need economic logic from the dollar bulls. Even without the carry trade,and assuming that the FED institute an equal interest with other currency cbs,I still see the dollar as fundementally weak due to the trade deficit. Why would the dollar appreciate if you are constantly running an account deficit to the tune of 360 bil a year?. And if past performance is any indication,the dollar was less before the crises,simply due to these facts.
on Wed, 11/25/2009 - 14:27
#142353
Economic Logic:
The USD crosses are just that: crosses. In other words, the greenback has to be compared to anther currency. In the case of the DXY, it is a basket of currencies.
When Tyler says that the DXY reach over 100, it is line with what the former finance minister of Japan said in that the USD/JPY cross may reach 200.
Also, when this massive trade in risky assets (including gold, BTW...) runs its course, traders will fall back to the dollar so fast it will make your head spin!
While the US may be in dire straights, we may be better off than the EuroZone and Asia.
:D
on Wed, 11/25/2009 - 18:04
#142731
+1
Your last statement rings true.
on Wed, 11/25/2009 - 13:34
#142233
The strong dollar policy is certainly helping durables goods orders soar isn't it
on Wed, 11/25/2009 - 13:36
#142240
Pump gold, dump gold, buy dollar.
on Wed, 11/25/2009 - 13:37
#142249
...then dump dollar, buy way less gold than you had before. Good plan.
on Wed, 11/25/2009 - 13:36
#142243
I think the key to this is in the title of the post:
"What Lies (Are) In Store For The Dollar?"
on Wed, 11/25/2009 - 13:36
#142245
Deflationary collapse is the midwife of hyperinflation
on Wed, 11/25/2009 - 13:40
#142258
5 Gold stars for you today (At least SOMEONE is paying attention!)
on Wed, 11/25/2009 - 13:39
#142255
What you all seem to be missing here is that the DXY will go to 120 r.e.l.a.t.v.e. to other fiat currencies. DXY does not measure against gold.
on Wed, 11/25/2009 - 13:40
#142260
Unless the $$$ breaks it channel, we would go into next year to hit 70. It could easily break the channel, but it has been pretty tight for months. Big question is: which way does it break first?
on Wed, 11/25/2009 - 13:41
#142264
This is the same as what Roubini was saying. The reversal of the carry trade will occur if the dollar appreciates but why should it? Why can't the weak dollar be a permanent feature of the economy?
on Wed, 11/25/2009 - 13:42
#142265
Complete bullshit.
Look...the US needs to be able to move $3.5T in new debt next year, rolling $2T and probably another $1.5T in deficit.
There is no fucking way this occurs into a dollar rally that severe.
We're bankrupt, ok? It's time to step back and see the forest. There is no way to cover liabilities in the event of significant deflation. They will PRINT INTO any dollar rally, because they have to.
Each time there's a deflationary spike, we see the Fed move closer and closer to where idiots like Douchinger said they would not - to direct printing. Last spike was more severe than the last...they dropped rates, instituted massive liquidity/lending programs, then circle jerk parked the trash assets on their own balance sheet. The next deflationary spike, what? Let it take down the government? Deflation means job loss, collapsing asset values, it means 50 State bankruptcies, the elimination of the holy trinity of police, firemen, teachers, and pensions, and everything. They won't have the receipts in the event of deflation to pay the freakin benefits. A material dollar rally will collapse the USG and all the carry trade markets. And, again, the DXY doesn't change SHIT as far as the VALUE of the dollar; it is SOLELY a comparative metric between fiat currencies.
The dollar can go to 120 if everyone reverses the carry trades overnight, sure...and gold will still go up. Because the reality is that the dollar is trending toward fucking worthless no matter if the DXY is at 200.
The USG's balance sheet is all you need to look at. SS is in deficit, Medicare is in deficit, receipts are falling, debt is ballooning, we are having to roll exponentially larger amounts at an increasing rate...is THIS the nation you want to park your wealth in the notes of??? You'd have to be insane. Like giving the keys to your Ferrari to the LEAST drunk at the bar!
on Wed, 11/25/2009 - 13:53
#142285
Well done sir!
on Wed, 11/25/2009 - 13:57
#142292
Powerful. Semi-irrefutable, as Kris Kristofferson might say.
on Wed, 11/25/2009 - 14:00
#142294
Relax Lucky7. Relax.
The National Economic Hurricane Center predicts 70 foot swells during this economic event. Currently we only have 6-8 foot swells.
on Wed, 11/25/2009 - 14:35
#142367
Speaking for myself, I don't want to "park" my money anywhere. But when the USD goes ballistic first on the Great British Pound Sterling, then the Euro, followed closely by the Yen, I am going to be all over that like white on rice.
Then, I'll take my profists and "park" them in US natural gas.
on Wed, 11/25/2009 - 14:37
#142379
I am impressed with the cooperation of world governments so far. I wouldn't have thought it possible. If/when China, Japan, Euroland, UK break ranks from political or geopolitical pressure (or for any other reason) wouldn't that create another deflationary spike? Wouldn't the FED sell its Treasuries easily and nobody can point a finger at the US? Then a slow devaluation of USD as the FED buys new Treasuries?
And/Or, couldn't the FED act as if they would responsibly cut off liquidity to relax inflation fears? Wouldn't that create another deflationary spike? Wouldn't the FED sell its Treasuries easily and nobody can point a finger at the US? Then a slow devaluation of USD as the FED buys new Treasuries?
rinse, repeat
2009-WWWWWWWWWWWW-2020 with those getting the memo making $$$ both directions, including the FED?
on Wed, 11/25/2009 - 15:03
#142434
The US is bankrupt! Gold should be $6000. The end is near! Gold bugs have decided that there's no risk in gold... you can't lose, load up! Isn't that what you hear right before a reversal?
on Wed, 11/25/2009 - 18:45
#142759
Or a currency collapse, yes?
on Thu, 11/26/2009 - 05:17
#142997
You are wrong. You can lose, big-time, at least in the short run, and in terms of having lost potential profits elsewhere.
on Wed, 11/25/2009 - 13:44
#142272
In risk of being beaten down, There seems to be a reasonable agument for the dollar to rise to 100+ range due to some simple facts. 1st the overcrowded Dollar carry trade will unwind at some point causing a massive need for greenbacks. 2nd US Politicos want to be re-elected and a dollar below the 70 mark would do serious damage at the polls. 3rd is the fact that US greenbacks stomp native currencies all over the world. Name me a marketplace (legal or illegal) that will not haggle the price of a item using the dollar and give a better bargin. The dollar has serious intrinsic value to people all over the world. ultimatly, the dollar will rise again.
on Wed, 11/25/2009 - 13:53
#142284
The carry trade phenomena is overblown... Once the dxy starts making new all time lows the momentum gorillas will pound it even lower.
on Wed, 11/25/2009 - 13:55
#142286
"What "Lies" in store for dollar"?
Shirley, that was a bon mot?
on Wed, 11/25/2009 - 14:06
#142304
Has Robert Prechter joined the team at ZH? DXY is a MEANINGLESS INDICATOR. And there is no comparing the one from 1980 to today because of all the changes.
on Wed, 11/25/2009 - 14:06
#142305
ZH if you have the time, would you please post that chart using annual bars
thanks in advance.
on Wed, 11/25/2009 - 14:08
#142308
Although a strong countertrend rally in the dollar for technical reasons could occur again, I have not seen one credible argument for a sustained rally based on fundamental economic factors.
The dollar is the common share of U.S.A., Inc. None of the fundamental problems facing U.S.A., Inc. have been addressed. In fact, even with the cooked books, every financial measure is still getting worse. On top of this confidence in management is deteriorating. I just don't buy any argument that somehow the governments and the economic policies in Europe, China, and Japan are significantly worse than the U.S.A., Inc. and that this will be basis for a sustained rally.
on Wed, 11/25/2009 - 14:11
#142315
http://www.gold-eagle.com/gold_digest_04/images/Zeal090304A.gif
on Wed, 11/25/2009 - 14:12
#142317
When Sri Lankans buy 10 tonnes of gold, you know someone is making a last ditch amount of money. The IMF is sellig high- and fucking India and Sri Lanka over(or they want to.)
the dollar carry- will it take 20 years to end like Japan or is Goldman going to pull the plug and get their 20% rebound in the Dxy. Or is that 20% rebound from 70 DXY?
on Wed, 11/25/2009 - 22:58
#142900
70 to 84 or
74 to 89? dxy
on Wed, 11/25/2009 - 14:12
#142318
I'm glad to see none of the erudite posters on ZH today have any memories of the days of 1990 when Japan Inc was the invincible world beater and USD was going to zero.
Those who ignore market history are doomed to repeat it ... and pay the price.
on Wed, 11/25/2009 - 14:25
#142345
All things traded runs in cycles ?
Of course there will be a dollar rally. Don't forget, the dollar is valued against other currencies whom also are worthless.
on Wed, 11/25/2009 - 14:29
#142357
Thinking way outside the box (in fantasy land), what if a Faustian Bargain between policymakers and moneyholders was made? Both parties need to sell their "soul" to maintain their power (quid pro quo ergo status quo:)).
How do we dewater our gasoline?
Remove x% of existing claims.
Those with eyes, see. Having ears, heed.
40muleteam borax
on Wed, 11/25/2009 - 15:30
#142481
I just bot Jan 120 calls
on Wed, 11/25/2009 - 15:32
#142484
The market will just continue on its merry credit-fuelled carry until people realise that AUD, JPY and YUAN are as dogsh*t as the dollar!
on Wed, 11/25/2009 - 16:01
#142555
Chairman Frank: The Chair will now recognize the Congressman from the 12th congressional district of the Tar Heel state.
Congressman: Your Honor I motion to nominate the gentlemen Durden of the Zerohedge as the next Secretary of the Treasury to replace Mr. Geitner.
Congressman Waters: I second the motion Mr. Chairman
Chairman Bernanke: I second the motion on the floor
Governor Mervyn King (BOE): I second the motion on the floor
Permanent President Van Rompuy (EU-Revived Holy Roman Empire): I second the motion
Sovereign HM Queen Elizabeth HRH (Royal Order of the Garter and Queen of England: I second that motion
George Soros: motion carries
Luke 4:5-8; The Holy Bible
on Wed, 11/25/2009 - 16:45
#142569
whoa whoa whoa ... did someone actually present an outlook for 'ol uncle buck with more than one zero in it ???
wow, that is just vulgar; haven't you heard it is about to hit zero? did you miss that memo?
we echo your lonely sentiment but don't read too much into thanksgiving week "trading" ... is gold this year's S&P with an 11%+ weekly run-up and one day crash next week? highly doubt it but would be remiss not to point out the possible alternation.
on Wed, 11/25/2009 - 19:32
#142785
Funny you should ask Fibozachi; originally posted in the Equity Forum section under US Dollar charts on 11/18/09. Obviously, you must have missed it. Or alternatively, were too busy counting EW waves. ;)
http://charts.dacharts.net/2009-11-18/Lionhead%20USD%20Wkly.png
Since readers here are EW/Prechter inclined, I will post no further charts. Good luck & God Bless you all this Thanksgiving weekend.
on Thu, 11/26/2009 - 19:08
#143507
cute chart Lionhead .. yeah, running businesses, handling clients and actually trading 24/7, we only have so much time/ interest in the analysis of others; if you only knew how many ZH articles sit on my floor, highlighted w/o posted comment or article (I'm looking at you, whomever wrote BAC's gold to 1,500 piece of trash 'analysis').
Still waiting to see actionable trading ideas/ posts outside of (the) Tyler(s) with a chart that has actual trading signals instead of adjectives. Friendly banter between technicians aside, we just wanna help promote TA in and of itself and help show how/ why it does work. Having said that, TA, like fashion, music or any other acquired taste is not for everyone and is not something you can pick up overnight (think brain surgery/ rocket scientist, which require a lot of study/ practice, expense, trial and tribulation, etc. that very few are willing to endure ... and while it is objective, TA and trading are certainly each an art form unto themselves and require healthy doses of nuance along long roads to mastery. To paraphrase Van Tharp, for every funnymental anal-yst who dismisses TA becuase they can't understand it: '10K - 20K hours and you might have a chance/ clue.'
on Wed, 11/25/2009 - 21:14
#142842
A lot can, and likely will happen. One thing for certain, if it goes much below 70 I'd say Zimbabwe will be Captain Ben and First Officer Timmy's destination.
Clueless utter morans flying this economy flight we are all stuck in.
on Thu, 11/26/2009 - 00:12
#142934
Nice pattern recognition. It would be hard to imagine it continues though, mostly due to trav777's arguments, and the fact that in order to keep the current system in place a compromise has been reached to reduce the US trade deficit through a weaker dollar.
Having said that, these are only the goals of the politburo, the execution may work out as they plan. They have a contigency plan for that and I don't think its pretty.
on Thu, 11/26/2009 - 06:11
#143004
My USD indicators are still giving bullish warnings and i'm expecting a rally when the Dow resumes it's downtrend.
http://www.zerohedge.com/forum/market-outlook-0
on Thu, 11/26/2009 - 07:26
#143017
Why doesn't the "red" rally match the actual graph? Sure makes the top look higher! As you can see, the green line matches price. For sure, DX rallies when feriners sell their toilet paper to buy ours ---they then buy metals priced in $, HA. It's the last step the $ deceivers leave out....when the gold squeeze is over, DX could be at 40! Current target - 72(DXH)
TG Anecdote:
My Sister in Law resides in Eastern Europe. She bought a turkey-Made in BRASIL!
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