Despite Banana Republic cat calls from the usual suspects it’s still only a correction, we think …

Quotable

“The worst is not, So long as we can say, “This is the worst.”

                              William Shakespeare

FX Trading – Despite Banana Republic cat calls from the usual suspects it’s still only a correction, we think …

The gold bugs are smelling blood. The new global currency crowd is out in full. And of course, just like that, we should all give up our sovereignty to some global policy committee so they can determine monetary policy for all. This stuff borders on kook-burger land!

But this same crowd of course believes we are the kook-burgers for daring to utter the term–dollar bull market. Yo! In case this crowd hasn’t been watching, the ever-doomed US dollar has rallied 27% to its high near 9000 on the dollar index since July of last year. Not a bad investment, even though the broken-clock-theory-the-dollar-is-dirt-crowd seems to hate. Don’t hate!

There’s no doubt it’s a scary thing watching the central bank monetize debt. But then again, watching all this stuff is bad-dream pull the covers over your eyes like. But if we work from the premise the Eurozone banking system is worse off than the US variety, and the Eurozone economy is weaker than Uncle Sam’s too, AND if this currency thing is a relative game (an ugly one indeed at the moment), we wonder if this sentiment swing on reaction to the Fed moves isn’t a bit knee-jerk to say the least? The point being this: the so-called dollar alternative that resides in the Eurozone isn’t looking so hot if you believe ultimately fundamentals driver currency prices over time, as we do.

Of course unlike the broken-clock-theory-the-dollar-is-dirt-crowd who never seems to let facts get in the way of their well worn and beyond consensus drone of a story, we do sometimes let the facts get in the way of ours. And the fact is the dollar is correcting now. And the fact is NO ONE EVER KNOWS when a “correction” is actually a trend change until the gift of hindsight is bestowed. And if one tells you they know, they are either a liar or they have never traded or they are just plain ignorant (we have more categories here to describe these clowns, but we need to keep it clean this early in the morning).

So, until Mr. Market, through is unassailable judgment which flows to us in the form of prices, tells us this is a change in the long-term dollar trend, we view this as a correction. But no doubt it can continue to be a violent viscous one with what is called legs–multi-week or month variety.

For all broken-clock-theory-the-dollar-is-dirt-crowd who have again emerged from the woodwork, we suggest you remember a very valuable piece of wisdom, especially when it comes to currency trading:

It ain’t over till it’s over!

Have a great weekend.

6 comments

  1. tetorii

    Well the fact of the matter is that the market will do whatever it wants and no matter what these experts may say it wont change what the market has done in the past,what its doing, and what it is going to do in the future.

    I personally find in rather entertaining that even though the United States has begun its “recession” yet the dollar, like you said, has risen not fallen in value.

    PS: I always enjoy reading your posts =)

    Reply
  2. tetorii

    Well the fact of the matter is that the market will do whatever it wants and no matter what these experts may say it wont change what the market has done in the past,what its doing, and what it is going to do in the future.

    I personally find in rather entertaining that even though the United States has begun its “recession” yet the dollar, like you said, has risen not fallen in value.

    PS: I always enjoy reading your posts =)

    Reply
  3. Toekan

    I am a bit suprised and interested in your opinion on mine as I am relatively new to the forex.

    1. The dollar index is not only EURUSD so where does the EUR vs USD comments come from. NZD was doing well as well.
    2. US is ‘printing’ more money than newspapers but the dollar still rose in value. That appears to contradict a reaction related to fundamentals. Why is this better than other zones that are more conservative (printing less)?
    3. US has a bad track record in working with fundamentals as that is partly the cause of the problems we are in at the moment. The US is now picking up the bill as they have no other way to do so, but that doesn’t mean that the USD is getting stronger from a fundamental point of view.
    4. The eurozone seems to have less problems than the US market.

    I believe that there is a lot of ‘air’ in the dollar value and I think it will correct even more. Escpecially when the market has more trust that the market will become more stable and will fall back in more traditional investments.

    Overall I don’t care which is stronger as I profit from both directions. I am just interested in having my assumptions tested against your experience.

    Reply
  4. Toekan

    I am a bit suprised and interested in your opinion on mine as I am relatively new to the forex.

    1. The dollar index is not only EURUSD so where does the EUR vs USD comments come from. NZD was doing well as well.
    2. US is ‘printing’ more money than newspapers but the dollar still rose in value. That appears to contradict a reaction related to fundamentals. Why is this better than other zones that are more conservative (printing less)?
    3. US has a bad track record in working with fundamentals as that is partly the cause of the problems we are in at the moment. The US is now picking up the bill as they have no other way to do so, but that doesn’t mean that the USD is getting stronger from a fundamental point of view.
    4. The eurozone seems to have less problems than the US market.

    I believe that there is a lot of ‘air’ in the dollar value and I think it will correct even more. Escpecially when the market has more trust that the market will become more stable and will fall back in more traditional investments.

    Overall I don’t care which is stronger as I profit from both directions. I am just interested in having my assumptions tested against your experience.

    Reply

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