The Golden Truth: U.S. Dollar Index Update...

Monday, April 12, 2010

U.S. Dollar Index Update...

The U.S. dollar appears to be breaking down now. The chart has a very bearish set-up formation and the Big Banks have a big short position in the dollar and a corresponding big long position in the euro. With regard to currencies, it's usually - though not always (see Soros vs. the British Pound circa 1992) - a bad bet to bet against Big Banks.

Gold is behaving similarly to the way it did in late 2005, when it moved for a short period higher in tandem with the dollar and then ran up another 33% from early 2006 to May 2006 while the dollar went into an inexorable decline.

(click on image to enlarge)

7 comments:

anliuTuesday, 13 April, 2010
We need to have a weekly close below 79.55 for the chart to turn bearish.
ReplyDelete
Replies
Dave in DenverTuesday, 13 April, 2010
Not sure where you're deriving your 79.55 number from unless it's some kind pivot calculation. I think the chart looks pretty bearish as is on a daily and even more so on a weekly basis.

I do use technical chart analysis as one component of looking at investment decisions, but it's not gospel. Here's a great example: Take a look at the daily chart of SA - Seabridge gold. My fund partner, who's been doing chart analysis since the 1970's, said he thought the chart looked awful in early March. Indeed it did. We didn't take a swing position in it. Look at it now. Seabridge on a fundamental basis may be sitting on the largest gold deposit in Canada. SA is still very cheap on a fundamental basis. Not as cheap as it was a month ago though, despite what the chart was telling us...
ReplyDelete
Replies
AnonymousTuesday, 13 April, 2010
Nice chart. I hope the line holds. I have drawn lines before just to seem them break again. But this looks like a good one.
ReplyDelete
Replies
JennTuesday, 13 April, 2010
Dave,

I'm confused as to why the banks are betting on the Euro, I thought it was in as bad as shape as the USD due to the issue with PIIGS.

I read somewhere that Greece may issue debt in USD, if so, wouldn't this make USD index go up? Could this also have something to do with the 420 billion FED loan that KD on TickerForum was talking about the other day?

I apologize if I'm missing something very obvious.
ReplyDelete
Replies
Dave in DenverTuesday, 13 April, 2010
Jenn, be careful with information passed on market ticker. That $420 billion was likely currency swaps. Some of the money may be connected to Greece and maybe not. Without transparency and an independent audit, we just don't know.

A lot of crappy conspiracy drivel gets thrown around the internet and market-ticker propogates a lot of it. I will say there is also some good information passed on that forum, but you have to be careful.

FOR INSTANCE, they are posting this chart and saying that it's the commercial banks flooding the market with lending activity:

http://market-ticker.org/uploads/2010/Apr/totll-1-year.png

That is NOT what is behind that chart. What is behind that chart is a FASB rule change as of 3/31/10 which required to banks to move a lot of off-balance-sheet crap onto their balance sheet. Please read this link for the Golden Truth:

http://www.federalreserve.gov/releases/h8/current/

That big spike in the chart above is a pure accounting change. Period.

On a fundamental basis, the EU is in much better shape than the U.S. and therefore the EU is "less worse" than the dollar. The Big Banks are playing the hedge funds. Notice all the hype about the dollar on CNBC and Bloomberg. Large and small speculators alike have piled into the dollar, driving it higher and the Big Banks are taking the other side of the trade. Same thing in the euro: specs are record short and Wall Street banks have taken the other side. You can get all this data in Commitment of Traders report which is issued every Friday afternoon.

Think of the U.S. dollar as a stock representing the health of the U.S. economy and system. You think it's healthy?
ReplyDelete
Replies
plantigradeTuesday, 13 April, 2010
The uptrend might still be roughly contained within two parallels.

And Greece is doubling up: ""40 billions for 2010 is part of a bigger amount for the three-year period. A logical amount for the three-year period would be double than 40 billion," the official told reporters."
http://www.zerohedge.com/article/and-proverbial-moral-hazard-foot-shooting-ensues-ink-not-dry-first-bail-out-greece-already-d
ReplyDelete
Replies
Dave in DenverTuesday, 13 April, 2010
Yes the uptrend for the dollar is still in an uptrend depending on how precisely you draw your lines. Having said that, the momentum indicators are pointing down (not just the macd and the rsi) and the dollar was briefly well below yesterday's low before they "caught" the markets.

To be sure, the technical picture can easily get weaker longs to launch their positions and that could trigger bigger stops.
ReplyDelete
Replies

Add comment

Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.