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Dollar may be done here - Be careful

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This falling wedge is getting painful, its getting into a very tight squeeze now...USD failed to make a new low after yesterdays rally, I wonder if it will pop up out of this resistance? If I do get a reversal, my first place to look for a long will be 76.65

 

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This falling wedge is getting painful, its getting into a very tight squeeze now...USD failed to make a new low after yesterdays rally, I wonder if it will pop up out of this resistance? If I do get a reversal, my first place to look for a long will be 76.65

A fine looking falling wedge that. Maybe this is what the mysterious countdown to Nov 7 date refers to. :rolleyes:

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A fine looking falling wedge that. Maybe this is what the mysterious countdown to Nov 7 date refers to. :rolleyes:

 

Hey you never know :rolleyes:

 

We have just made a breakout, of course until we get above 75.70 then nothing is confirmed...and even then this is only a very small micro-intraday pattern, so not one to think about taking longs.

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Hey you never know :rolleyes:

 

We have just made a breakout, of course until we get above 75.70 then nothing is confirmed...and even then this is only a very small micro-intraday pattern, so not one to think about taking longs.

Yep, lower highs and lower lows at the moment... looks like it wants to keep going down here. I am hoping for 72ish in the coming month. But keeping an eye on it. B)

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Why would the US want to give China precious gold for cheap?

I was responding to the question of why it would be good for China. If you want to know why it might be good for "the US", just think about whether the people who would be manipulating the dollar higher are the same ones who borrow at close to zero, whether or not they want to buy cheap gold themselves and whether they and their wealth would be welcomed by other countries if the US breaks down into violence.

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I put on Goldfinger's gold thread that technicals and action increase the probability of a $ bounce. A close below 74 is probably confirming the break down. Howwver, it doesn't even break below 75.

 

With stock market looking very fragile and G not surging even though € goes above 1.5, there could well be something to the recent action. Few confirmations of 'what should obviously happen'. This means...

 

And if you don't at least allow the possibility then you may regret it.

 

I'm tilting towards $ rise. So we've lightened on stocks and comms.

 

If we're wrong we'll just rebuy and incerase exposure.

 

However, I am ready to reduce exposure further, after the massive rise this year.

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King Dollar Forced to Abdicate

 

By Peter Schiff - 23rd October 2009

 

For the most part, the value of the dollar is given cursory attention by the financial media. Typically, its movements are assigned an importance on par with much less determinative metrics such as natural gas futures and construction permits. It's only when major milestones are reached that anyone really takes notice of the dollar. We are living through one of those times.

 

The great dollar rally of 2008-2009 has come full circle. When the financial crisis exploded in its full ugliness in mid-2008, the dollar, which had steadily declined over the previous four to five years, put in a rally for the record books. By March 2009, as investors across the world sought safety from the financial storm, the index had surged more than 25%. Since then, the dollar has steadily declined to the point where nearly all those gains have vanished. In short, the panic rally has given way to the long term trend.

 

So, as the dollar index makes fresh 52-week lows on a nearly daily basis, discussion on the greenback is heating up. And while real insight on the topic is hard to find, the debate centers on the battle between two conventional opinions – both of which are wrong.

 

The first camp, which is generally supportive of government intervention in the economy, argues that dollar's decline is a positive for both the economy and the stock market. The second camp, which tends to fall on the more conservative end of the political spectrum, views the dollar's decline as a problem but feels that tough talk and slightly higher interest rates are all that is needed to restore ‘King Dollar’ to its throne.

 

First of all, a weak dollar is no better for Americans than a lower paying job is for a worker. And although I would prefer that the dollar remain strong, I know that currency values are a function of supply and demand, not wishful thinking. The past years of reckless monetary and fiscal policy have created conditions that must push the dollar down. Vastly expanded debt levels and monetary expansion have created a greater supply of dollars, while poor investment performance and diminished industrial capacity have lessened the demand for dollars.

 

The regrettable truth is that while the weak dollar will help rebalance the global economy, it is not a panacea for the U.S. The fall is no more worthy of celebration than a student celebrating falling grades on his report card. If the dollar does not recover eventually, Americans will suffer diminished living standards. To avoid this we must make difficult reforms now. If we continue our current policies, we run the risk of a complete dollar collapse. Far from helping to solve our problems, this would be a true nightmare scenario.

 

On the other side of the argument, those who correctly equate a weaker dollar with a weaker America mistakenly believe that mere posturing by officials or trivial rate hikes would be sufficient to restore the dollar's lost vitality. We are long past that point. The best we can do now is to accept the penalty of a weaker dollar as punishment for our prior failures, and start building for the future.

 

To save our currency, the Fed must get very aggressive with interest rate hikes and rein in the supply of dollars that have flooded the world over the past few years. The federal government must also do its part by cutting spending, which means no more stimulus and no more bailouts. Undoubtedly, these actions will have unpleasant economic and political consequences. A student who studies harder may have to miss a party or two. A simple analogy, but unfortunately it is that simple.

 

Even in the unlikely event that our political leaders take these courageous steps, the near-term trajectory of the dollar may still be uncertain. A dollar rally that results from higher interest rates and a narrowing federal deficit may soon fade as the recessionary forces that such moves would unleash act to weaken the dollar once again. But at least we would be building a foundation upon which the dollar could eventually find some footing.

 

With a restructured economy, higher savings, more capital investment, lower government deficits, and higher interest rates, the United States would once again attract international investment. Funds would flow here not out of fear, as they did last year, but out of confidence. The dollar's strength would not rest on the willingness of foreign governments to buy our debt, but the willingness of foreign consumers to buy our products.

 

Only then could King Dollar regain its throne.

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Krugman: Weak Dollar = greatest thing since sliced bread!

 

http://www.nytimes.com/2009/10/23/opinion/...amp;ref=opinion

The thing is, right now this caution makes little sense. Suppose the Chinese were to do what Wall Street and Washington seem to fear and start selling some of their dollar hoard. Under current conditions, this would actually help the U.S. economy by making our exports more competitive.

 

In fact, some countries, most notably Switzerland, have been trying to support their economies by selling their own currencies on the foreign exchange market. The United States, mainly for diplomatic reasons, can’t do this; but if the Chinese decide to do it on our behalf, we should send them a thank-you note.

USDX to 50? But then, everyone wants a weak currency, right?

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Krugman: Weak Dollar = greatest thing since sliced bread!

 

http://www.nytimes.com/2009/10/23/opinion/...amp;ref=opinion

USDX to 50? But then, everyone wants a weak currency, right?

 

No wonder, the phoney economist just gambled most of his Nobel Prize on a Manhattan Condo.

When I pass him begging in the street someday, I wont put a coin in his hat, unless maybe I am carrying a penny.

 

Here's what a real economist has to say about the impact of the weak Dollar:

 

 

Roubini on the Seeds of the Next Crisis

By editor|Oct 23, 2009,

 

Nouriel Roubini, one of the biggest bears on Wall Street and known for his warnings about the U.S. economy, believes oil is going to push over $100 for reasons that have nothing to do with the fundamentals of supply and demand. According to him, a similar argument can be made for other commodity prices.

 

IndexUniverse: “There’s a huge bubble, because we have zero rates in the U.S.”, Roubini said in an interview with IU, “..Everyone is borrowing at zero interest rates in dollars and getting a capital gain because the dollar is weakening, so they are borrowing at negative rates. And then they invest in risky assets: commodities, equities, credit. We’re creating a bigger bubble than before. It’s going to go crashing down, in an ugly way. That’s the basics of the argument.

 

Roubini also said that “a wall liquidity” is chasing risky assets, “that liquidity can chase those assets higher for the time being until the huge carry trade—the asset bubble and the wall of liquidity—comes crashing down. You can still have all the risky assets going higher. Of course, the higher they go, the more they diverge from fundamentals, and the riskier the situation becomes.”

 

Roubini touched also on the deflation argument, hinting that gold is not the answer. He said ” the only other case in which gold can go higher with deflation is if you have Armageddon, if you have another depression. But we’ve avoided that tail risk as well. So all the gold bugs who say gold is going to go to $1,500, $2,000, they’re just speaking nonsense. Without inflation, or without a depression, there’s nowhere for gold to go. Yeah, it can go above $1,000, but it can’t move up 20-30 percent unless we end up in a world of inflation or another depression. I don’t see either of those being likely for the time being. Maybe three or four years from now, yes. But not anytime soon.”

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Follow link for Yahoo Tech|Ticker video.

 

America's Weak Dollar Policy: "You Can Envision All Sorts of Crises"

 

Posted Oct 26, 2009 10:07am EDT by Aaron Task in Investing, Recession

 

The Dollar Index hit yet another 14-month low early Monday after a Chinese central bank official urged the PRC to diversify its reserves into more euro and yen. A stronger-than-expected GDP report in South Korea also put pressure on the greenback as traders expect other central banks to follow Australia's lead and raise rates while the Fed stands pat.

"The dollar is a significant concern," says Leo Tilman, president of L.M. Tilman & Co. and author of Financial Darwinism." You can envision all sorts of crises scenarios where rest of the world stops buying U.S. assets because of the dollar [and] you have higher interest rates and all sorts of recessionary pressures."

 

With the U.S. Treasury set to auction a record $123 billion of notes this week and the Fed's $300 billion Treasury purchase program set to expire, those risks should not be taken lightly. Of course, such concerns have been circulating for a while and have not come to fruition, to date.

 

It's "very difficult to say" when foreigners stop talking about diversifying away from the dollar and take more concerted action, Tilman admits. But "it's hard to imagine a lot of foreign buyers are going to tolerate further declines in the dollar. "

 

Tilman, whose firm advises institutions on strategic risk management, says the day of reckoning is likely to come within the next year.

 

"A lot depends on how sustainable the recovery in the U.S. is: If the Fed has an ability to start hiking IR, that will mitigate some of the pressures on the dollar," he says. "But if we see rest of the world starts hiking rates and the Fed lagging behind because the U.S. economy is so fragile, that will be the breaking point. We're taking the second or third quarter of next year."

 

 

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Iran: Oil bourse inaugurated

 

27 October 2009

 

TEHRAN - The Iranian Oil Bourse was inaugurated on Monday in the Persian Gulf island of Kish as a venue to export oil and petrochemical products.

National Petrochemical Company's Managing Director Adel Nejad-Salim said in the opening ceremony that all petrochemical products will be gradually offered on the market, IRNA news agency reported.

 

The oil bourse is intended as an exchange market for petroleum, gas, and petrochemicals in various currencies, primarily the euro and Iranian rial, and a basket of other major currencies.

 

On February 4, 2008 the Iranian Cabinet approved the creation of the oil bourse in two stages - first for crude and second for oil byproducts transactions.

 

Iran, having the world's second largest gas reserves and third largest oil reserves, is trying to play a more active role in oil and petrochemical transactions in international markets.

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The US Dollar Rally of 2008: The Consequence of a Bull Market in Fraud

 

The theory of a short squeeze in Eurodollars which we had first put forward last year "The Dollar Rally and Deflationary Imbalances in the US Dollar Holdings of Overseas Banks" seems to be confirmed by this paper from the NY Federal Reserve bank, and the latest figures on cross border currency transactions from the BIS.

 

"Highlighting the international dimensions of the financial crisis that began in the fall of 2007, authors Niall Coffey, Warren B. Hrung, Hoai-Luu Nguyen and Asani Sarkar examine the difficulties international firms encountered obtaining U.S. dollars and the ensuing effects on the foreign exchange (FX) swap market. Analysis shows that as firms increasingly turned to the FX swap market to obtain funding, the dollar “basis”—the premium paid for dollar funding—became persistently large and positive, primarily as a result of higher funding costs paid by smaller firms and non-U.S. banks." The Global Financial Crisis and Offshore Dollar Markets

 

Further, the latest data from BIS shows that the dollar rally tracked the acquisition of eurodollars with a significant correlation. This is shown on the chart at the right.

 

After the Federal Reserve alleviated the short squeeze through dollar forex swaps "The Fed's Currency Swaps" with the central banks in the affected regions, the dollar squeeze dissipated and the dollar fairly quickly resumed its downward trend. There is a case to be made that some of the big US money center banks were using the dollar shortage to reap windfall profits, but this could have also been a side effect of the seizing in the short term credit markets.

 

But much of the European outrage, as least, was in feeling that they had been 'set up' by the very banks that had sold them the foully rated instruments in the first place. A classic face ripping, as they say at Wall and Broad. And this similar to the reason is why the Chinese government declared that its own institutions could walk away from derivatives arrangements that had been sold to them by the Wall Street wiseguys under false pretenses. US towns and states are not so fortunate it appears.

 

What does this mean? It implies rather strongly that those looking for a repeat of the sharp dollar rally from last year are very likely to be sadly disappointed.

dollarimbalances.PNG

 

 

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Red Alert - Get out of the Dollar

 

Absolutely nothing new here.

I reckon he will be right in the long run, but may miss a good dollar rally.

 

Why does he think the Euro is better?

 

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Ron Walker on the Dollar and stocks

 

10-26 market update pt 1

http://www.youtube.com/user/chartpattern#p/u/2/CRqSjzQkizk

 

He sees a breakout above the wedge, lower Gold, lower stocks

 

"Definitely, commodities are going to take a hit, if the Dollar is going to rally."

 

Lots of charts, for those that like them

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This falling wedge is getting painful, its getting into a very tight squeeze now...USD failed to make a new low after yesterdays rally, I wonder if it will pop up out of this resistance? If I do get a reversal, my first place to look for a long will be 76.65

 

1256306449_64_UploadImage.png

 

This certainly looks like breakout of that wedge. USD rising very strongly against the CAD...

 

1256728289_78_UploadImage.png

 

 

 

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Red Alert - Get out of the Dollar

 

Absolutely nothing new here.

I reckon he will be right in the long run, but may miss a good dollar rally.

 

Why does he think the Euro is better?

No, he thinks Gold is much better than than Euro.

 

 

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This certainly looks like breakout of that wedge. USD rising very strongly against the CAD...

The first thing I noticed when back from work was the big jump against CAD. USDX [basically Euro right] now 76.22. Is there a point where you think the dollar rally is confirmed? I still have not bought dollars. Not too concerned as have Yen. When the dollar strengthens, it usually strengthens even more.

 

Edit: just saw your previous post: 76.65

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