WATER COOLER CHATTER
It is time to get back to the world's favorite subject during gatherings by amateur economists around the company water coolers, the US Dollar. I find it interesting just in general how now there seems to be a general buzz that the dollar could strengthen going forward. Some of these people are one in the same who decried the death of the US Dollar last year after it had already been clobberred. If for no other reason, this type of thing should teach you that the majority of these hacks have no idea what they are talking about. You are much better off educating yourself and making your own calls. These same people misread the real estate and stock market crashes, as well as the OIL market implosion. They also said to get long commodities right before they got slaughtered.
So I would pose the following question. "Why should anyone cite the same wrongway feldmans who missed some of the most obvious asset bubbles in history, when supporting an argument that the US Dollar will collapse?" Their shared opinion should make it the gospel?
As I have stated in here many times, I am not an economist. If I were wrong that often I would not be able to support my family. I am a trader and I do not make trading decisions based on arcane theory of one possible future outcome that is linked to a causal effect that should occur in theory after my predicted event occurs. On the surface it is difficult to argue that Barry and the Cosby Kids ( my name for his supporting staff ), are setting us up for the worst economic nightmare of all time. This man is an idiot plain and simple, and at some point in the future this massive inflation that will be an outgrowth of his policies so many are calling for, could very well arrive. However, in the meantime, I still see us as being in a deflationary cycle. I know of few things I consume that are rising in price, most of them are declining, some rapidly. It is my contention that Barry and Bernanke know this and are trying to inflate things to fight it off. A massive deflation wave is not going to be any better than runaway inflation would be.
If you take a look at what is occuring in Europe it just further tells me that the US Dollars international status at the moment is not declining, it is improving. All this talk about the Dollar being taken out as the worlds reserve currency is poppycock. What we are going to have the Yuan take it's place? Please just think logically about some of these statements when you hear them. Now that I have jumped off my pedestal, lets review the chart above.
The DX as you can see has been in a nice uptrend that began in November of last year, right when I was telling everyone to look for a bottom. I was to be fair about a month early, but overall still not a bad call. One of the things that jumps out off this chart to me is the divergences that we had in the accumulation/distribution indicators ( purple and green ). They rarely diverge that much, and when they do we have to pay attention. I did short the DX a few times up there due to that, and the trades were marginal at best, one scratch and one small loss. Now the price is giving way to this pressure and going down. This is why I was long the Euro, just exited this morning. It trades opposite the DX and moves more, so that is why I played there and did not do another short trade here.
However, what we have now is the momentum oscillators approaching levels that were last reached when price was much lower than where it is now, a possible exhaustion move. Also, we are approaching weekly support levels in what has become a weekly uptrend. This tells me to look for a long entry with this dip, and that is also why I took profits in the Euro this morning. I am looking to buy this dip. Below is the Euro trade I made, just a quickie but decent money.