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ST
12-11-08, 10:09 AM
I'm no technician but it looks to me like some important short term support for the dollar has broken here under .85.

Comments?

jtabeb
12-11-08, 11:54 PM
I'm no technician but it looks to me like some important short term support for the dollar has broken here under .85.

Comments?

I don't know bout you, but If I were the Government, it seems the perfect time to pull a "Whoopsie" and crash the dollar would be during when EVERYONE is piling into T-bills and forsaking everything else.

Give them no time to react with whiplash of the worst kind. Hudson suggested this so I can't take credit, but I'm very much on the look-out for it. I have moved to counter this risk because, I don't like being set up for failure (on someone else's choosing, no less).

we_are_toast
12-12-08, 09:18 AM
I'm no technician but it looks to me like some important short term support for the dollar has broken here under .85.

Comments?

From Rick Ackerman on Dec. 8

So why should a 1.5% drop in the Dollar Index, from 87.12 to 85.82, be viewed by gold bugs as a sign that deflation is loosing its grip on precious metals? According to our technical runes, that would test a key Hidden Pivot support (see chart above) whose resiliency holds clues to the dollar’s future. If the support fails to produce a bounce, however – or worse yet, the index closes for two consecutive days beneath it -- that would suggest the dollar’s rally is starting to sputter out.
http://www.kitco.com/ind/akerman/dec082008.html

ST
12-12-08, 11:26 AM
Brad Setser - Has the Dollar Peaked? (http://blogs.cfr.org/setser/2008/12/12/has-the-dollar-peaked/)

For much of the most recent phase of the rolling global crisis, the dollar and the yen rose against the euro, the pound and most emerging market currencies.
Some of that was a reaction to the euro’s extreme strength going in to the crisis; a $1.55 euro amid a European recession would have made life very uncomfortable for many European manufacturers.

But some of the dollar’s rise also reflected a global scramble for dollar liquidity, whether as a safe have (compared say to the ruble, the dollar looks good .. ) or to repay dollar-denominated debts. John Authers (http://www.ft.com/cms/s/0/39528a76-c7ae-11dd-b611-000077b07658.html)of the FT:

On a trade-weighted basis, the dollar rose 22.7 per cent from July until its peak last month. This was not, evidently, due to any great strength in the US economy. Instead it was largely a perverse phenomenon – as traders sold assets to pay down debts (deleveraging), they often had to buy dollars. So as the crisis intensified, so the dollar strengthened. The only exception to this was the yen, which does even better than the dollar when investors are anxious.

Over the past two days, though, the dollar has fallen against both the euro (http://www.ft.com/cms/s/0/d17d4cf8-c779-11dd-b611-000077b07658.html) and the yen (http://www.ft.com/cms/s/0/a32a8358-c80e-11dd-b86f-000077b07658.html).

The US trade data surprised on the downside — and while it is far too soon for the dollar’s recent rise to really have an impact on the trade data, the rise in the deficit perhaps did remind the market that over time a rising dollar would tend to maintain the still large trade deficit (http://www.ft.com/cms/s/0/724f6ed6-c7b6-11dd-b611-000077b07658.html) not bring it down. Macro man (http://macro-man.blogspot.com/2008/12/bad-news.html) was far more surprised by the rise in the non-oil deficit than I was; it was always going to be race down between imports and exports. And last month exports won … - continued here - (http://blogs.cfr.org/setser/2008/12/12/has-the-dollar-peaked/)

Contemptuous
12-12-08, 06:03 PM
IMO USD has **several years** to run, and as a dreary corollary, all precious metals, upon which is lavished considerable parental care and loving attention in this community, are dead money for the equivalent number of years (3-5). Current **early days** pullbacks in the USD are opportunities to buy it. The markets can stay irrational so much longer than we can stay solvent in our search for rational answers, that we are reduced to wraiths wandering around in the desert. Bet against the USD to your own detriment for the next couple of years.


Brad Setser - Has the Dollar Peaked? (http://blogs.cfr.org/setser/2008/12/12/has-the-dollar-peaked/)

For much of the most recent phase of the rolling global crisis, the dollar and the yen rose against the euro, the pound and most emerging market currencies.
Some of that was a reaction to the euro’s extreme strength going in to the crisis; a $1.55 euro amid a European recession would have made life very uncomfortable for many European manufacturers.

But some of the dollar’s rise also reflected a global scramble for dollar liquidity, whether as a safe have (compared say to the ruble, the dollar looks good .. ) or to repay dollar-denominated debts. John Authers (http://www.ft.com/cms/s/0/39528a76-c7ae-11dd-b611-000077b07658.html)of the FT:

On a trade-weighted basis, the dollar rose 22.7 per cent from July until its peak last month. This was not, evidently, due to any great strength in the US economy. Instead it was largely a perverse phenomenon – as traders sold assets to pay down debts (deleveraging), they often had to buy dollars. So as the crisis intensified, so the dollar strengthened. The only exception to this was the yen, which does even better than the dollar when investors are anxious.

Over the past two days, though, the dollar has fallen against both the euro (http://www.ft.com/cms/s/0/d17d4cf8-c779-11dd-b611-000077b07658.html) and the yen (http://www.ft.com/cms/s/0/a32a8358-c80e-11dd-b86f-000077b07658.html).

The US trade data surprised on the downside — and while it is far too soon for the dollar’s recent rise to really have an impact on the trade data, the rise in the deficit perhaps did remind the market that over time a rising dollar would tend to maintain the still large trade deficit (http://www.ft.com/cms/s/0/724f6ed6-c7b6-11dd-b611-000077b07658.html) not bring it down. Macro man (http://macro-man.blogspot.com/2008/12/bad-news.html) was far more surprised by the rise in the non-oil deficit than I was; it was always going to be race down between imports and exports. And last month exports won … - continued here - (http://blogs.cfr.org/setser/2008/12/12/has-the-dollar-peaked/)

ST
12-15-08, 01:49 PM
IMO USD has **several years** to run, and as a dreary corollary, all precious metals, upon which is lavished considerable parental care and loving attention in this community, are dead money for the equivalent number of years (3-5). Current **early days** pullbacks in the USD are opportunities to buy it. The markets can stay irrational so much longer than we can stay solvent in our search for rational answers, that we are reduced to wraiths wandering around in the desert. Bet against the USD to your own detriment for the next couple of years.

I find that the most unlikely scenario. There is simply too much pain to be associated with a strong USD all around. I think EJ/FRED are right on this - the dollar will be devalued within six months and perhaps it already began a few days ago. It is the only way to avert a deflationary spiral. Asset prices continue to go down, but over a few years inflation via dollar devaluation stems unemployment in some sectors and stops debt from swallowing wages. Other outcomes are politically untenable.

GRG55
12-16-08, 12:15 AM
I find that the most unlikely scenario. There is simply too much pain to be associated with a strong USD all around. I think EJ/FRED are right on this - the dollar will be devalued within six months and perhaps it already began a few days ago. It is the only way to avert a deflationary spiral. Asset prices continue to go down, but over a few years inflation via dollar devaluation stems unemployment in some sectors and stops debt from swallowing wages. Other outcomes are politically untenable.

I wonder if both of you are partly correct. What if the US$ range trades for an extended period of time? Declining whenever the actions of the authorities create sufficient confidence [but not euphoria...:)], and disincentive to hold cash, as risk trades get put on. And then resuming another temporary upward trajectory as the risk trades come off with deteriorating international economic news? That range trade, or "ratcheting", could be within an overall declining US$ index trendline, or maybe not? Depends, perhaps, on how determined other Central Banks are to hold their currency exchange rates vs the US$.

Contemptuous
01-15-09, 01:06 AM
WHY USD SHORT TRADES WILL BEGGAR YOU IN 2009 (AND MAYBE ALSO IN 2010) - IN ONE CHART

968

There is little to ponder here. Euro bank exposure to catastrophic declines in emerging markets is vast. The financial iniquity may have originated in the US, but the irony is that EU banks are acutely vulnerable to it's globalized consequences. The EURO will in all likelihood prove to be a rickety structure indeed to survive this maelstrom. When or if the EURO takes a big fall, or global perceptions see it's falling below a "cusp" of influence as the anti-dollar - watch the USD soar far higher than "rational fundamentals" can ever explain.

GAVEKAL - QUOTING AN ARTICLE IN A RECENT FINANCIAL TIMES:


(6 Jan ’09):


“The important question of 2009 will be whether Milton Friedman’s prediction that the euro will not survive its first recession intact will turn out to be prophetic”.


This is why so many people are perplexed by the dollar—they focus only on US economic ills, which are many, and they say "given all these catastrophic fundamentals, how can it not collapse"? The counter argument remains exceedingly simple - collapse against what? The EURO, the sole credible challenge vs. the USD, is moving in lockstep with emerging markets. And anyone expecting emerging markets to "lead" the economic resurgence in the next two years is IMO dreaming. Got enough dollars? :eek: :confused: :rolleyes:

D-Mack
01-15-09, 06:20 AM
WHY USD SHORT TRADES WILL BEGGAR YOU IN 2009 (AND MAYBE ALSO IN 2010) - IN ONE CHART

968

There is little to ponder here. Euro bank exposure to catastrophic declines in emerging markets is vast. The financial iniquity may have originated in the US, but the irony is that EU banks are acutely vulnerable to it's globalized consequences. The EURO will in all likelihood prove to be a rickety structure indeed to survive this maelstrom. When or if the EURO takes a big fall, or global perceptions see it's falling below a "cusp" of influence as the anti-dollar - watch the USD soar far higher than "rational fundamentals" can ever explain.

GAVEKAL - QUOTING AN ARTICLE IN A RECENT FINANCIAL TIMES:


(6 Jan ’09):


“The important question of 2009 will be whether Milton Friedman’s prediction that the euro will not survive its first recession intact will turn out to be prophetic”.


This is why so many people are perplexed by the dollar—they focus only on US economic ills, which are many, and they say "given all these catastrophic fundamentals, how can it not collapse"? The counter argument remains exceedingly simple - collapse against what? The EURO, the sole credible challenge vs. the USD, is moving in lockstep with emerging markets. And anyone expecting emerging markets to "lead" the economic resurgence in the next two years is IMO dreaming. Got enough dollars? :eek: :confused: :rolleyes:



Deutsche Bank was also into gambling


Deutsche Bank Reports EU4.8 Billion Loss on Trading (Update3) (http://www.bloomberg.com/apps/news?pid=20601087&sid=aoOxcqP9qwv0&refer=home)
Email | Print | A A A


By Jann Bettinga and Oliver Suess


Jan. 14 (Bloomberg) -- Deutsche Bank AG, Germany’s biggest bank, reported a record loss of about 4.8 billion euros ($6.3 billion) in the fourth quarter after the worst financial crisis since the Great Depression pummeled stock and bond trading.

The bank fell 9 percent in Frankfurt trading. The loss, which compares with a profit of about 1 billion euros a year earlier, also reflects provisions for debt backed by bond insurers and “substantial injections” of cash into money market funds, the Frankfurt-based bank said today.

Deutsche Bank has “scaled back or exited trading strategies most affected by market turbulence,” Chief Executive Officer Josef Ackermann said in a statement. The German bank lost about $1 billion from bad bets involving bonds hedged by credit-default swaps in the quarter, plus $500 million trading equities, two people with knowledge of the matter said this week. The company reported its first annual loss in more than 50 years.

“The enormous fourth-quarter and full-year loss is a shock to investors,” Michael Seufert, an analyst at NordLB in Hanover with a “sell” rating on Deutsche Bank, wrote in a note to clients today. “The process of reducing risks and scaling down the balance sheet is proving to be very painful.”

raja
01-15-09, 09:57 AM
WHY USD SHORT TRADES WILL BEGGAR YOU IN 2009 (AND MAYBE ALSO IN 2010) - IN ONE CHART


Lukester,
I don't know about the timeframe, but I'm with you on this one . . . .

Sure, the dollar's being gutted, but so is everything else.
Where to invest? At least the US has political stability in its favor (for now). Seems like short-term Treasuries and maybe PM are the best bets.

If someone has other suggestions as to where to invest now, or in the foreseeable future, I'm all ears.

GRG55
01-15-09, 11:08 AM
Lukester,
I don't know about the timeframe, but I'm with you on this one . . . .

Sure, the dollar's being gutted, but so is everything else.
Where to invest? At least the US has political stability in its favor (for now). Seems like short-term Treasuries and maybe PM are the best bets.

If someone has other suggestions as to where to invest now, or in the foreseeable future, I'm all ears.

As Finster is fond of reminding us, these things are always relative.

Let us not confuse a declining confidence in the Euro, and other currencies, with some sort of improvement in confidence in the bonar.

The currencies of countries running deficits, instead of surpluses, would seem to be particularly risky over time. Why would the US $ be an exception?

Basil
01-15-09, 11:07 PM
IMO USD has **several years** to run, and as a dreary corollary, all precious metals, upon which is lavished considerable parental care and loving attention in this community, are dead money for the equivalent number of years (3-5). Current **early days** pullbacks in the USD are opportunities to buy it. The markets can stay irrational so much longer than we can stay solvent in our search for rational answers, that we are reduced to wraiths wandering around in the desert. Bet against the USD to your own detriment for the next couple of years.

Lukester,

I don't mean to pick on you, but it seems that you have not yet defended this position with recourse to substantial verifiable research, only with repeated assertions and citations from advertisements that are geared towards making one think he will get rich by giving someone else $1500 for him to tell you how to invest in USD. I know other people here do the same with gold, but EJ and others have provided substantial research as well. So I would like to hear a detailed explanation for why USD will soar, not mere warnings and assertions.

Perhaps you have posted this in another thread, if so, my apologies, please do direct me there.

Thanks,

JL

Contemptuous
01-16-09, 02:37 AM
Basil,

With respect, what "substantial verifiable research" predicted the USD blistering breakout back up over 80 on the dollar index? When it broke down through 80 it was piercing a 25 year long barrier, and this event in rough terms was considered by some fairly seasoned observers in the markets (people with perhaps 20 years of market watching under their belts) to be a seminal event, forecasting much lower breaks to come. I agree, those much lower breaks to come are overwhelmingly likely. iTulip does peerless research and trusts only in carefully reasoned economic analysis. And I agree that ultimately it should be trusted to peer into the future a good deal better than most others. iTulip's position is that the USD is toast, and all else is flim-flam market analysis. They may be off on the timing once or twice, but they are indeed very risky to bet against on the macro.

But that's just the point. What reasoned analysis would forecast a USD bull move that extends all the way up to 140++ on the USD index, AFTER it had broken down through 80, which was a 25 year long floor?

I am fending off mishap and misfortune at a (very small) US subsidiary of a German company at this time. The ugly realities EJ predicted are intruding upon my spare time and I've had to give up my engrossment with all things iTulipish for the time being. You are a wonderful community, but due to these encroachments from the nasty and brutish emerging reality I can't get engaged in discussions as much as I'd otherwise like. I therefore apologize that I cannot put forward the reasoned analysis that would win your further trust. But my opening question is a good question. "Substantial, verifiable research" would have conquered the world, were it's predictive powers so infallible as to reliably map the "inevitable" future events. Here we have seen a lemming like rush into treasuries - US TREASURIES - from not just Americans, but many others worldwide. Marc Faber says they are the short of the year - he's another "fundamental analysis" guy and one bets against him at one's risk.

I will not offer you the minutely reasoned substantiations you require to gain conviction. I'll do the opposite - I'll "see you, and raise you one" - within 5-6 years we see the full trajectory of a DOW bull market with this flagship index acting as the highly unexpected safety valve for the massive liquidity injections - the USD, and the DOW, power the way forward, while gold compared to the DOW's ascent to 28000-32000 will disappoint comparatively. How do you like them apples? Straight out of left field whizzing by at 150 miles an hour. How fitting for investing history, that all the "smart observers" didn't give this scenario a nickel for it's chances, and instead stood back soberly and intelligently, in things like gold, and treasuries, while the flat footed "dumb money" morons who stayed parked in equities because they did not have any inkling that fundamentals for another stock bull market were in fact truly horrific - wound up riding this escalator up into a bigger equities boom than the 1990's tech stock bubble.

QUOTE: "only with repeated assertions and citations from advertisements that are geared towards making one think he will get rich by giving someone else $1500 for him to tell you how to invest in USD."

For the next four years, it may pay to examine with extraordinarily skeptical scrutiny, which "self evident truths" one subscribes to.

Respectfully,

Lukester



Lukester,

I don't mean to pick on you, but it seems that you have not yet defended this position with recourse to substantial verifiable research, only with repeated assertions and citations from advertisements that are geared towards making one think he will get rich by giving someone else $1500 for him to tell you how to invest in USD. I know other people here do the same with gold, but EJ and others have provided substantial research as well. So I would like to hear a detailed explanation for why USD will soar, not mere warnings and assertions.

Perhaps you have posted this in another thread, if so, my apologies, please do direct me there.

Thanks,

JL

GRG55
01-16-09, 08:27 AM
...GAVEKAL - QUOTING AN ARTICLE IN A RECENT FINANCIAL TIMES:


(6 Jan ’09):


“The important question of 2009 will be whether Milton Friedman’s prediction that the euro will not survive its first recession intact will turn out to be prophetic”.



This is why so many people are perplexed by the dollar—they focus only on US economic ills, which are many, and they say "given all these catastrophic fundamentals, how can it not collapse"? The counter argument remains exceedingly simple - collapse against what? The EURO, the sole credible challenge vs. the USD, is moving in lockstep with emerging markets. And anyone expecting emerging markets to "lead" the economic resurgence in the next two years is IMO dreaming. Got enough dollars? :eek: :confused: :rolleyes:



Trichet Vision Unravels as Italy, Spain Debt Shunned (http://www.bloomberg.com/apps/news?pid=20601087&sid=azQAixzrw_y4&refer=home)

Jan. 16 (Bloomberg) -- European Central Bank President Jean-Claude Trichet (http://search.bloomberg.com/search?q=Jean-Claude+Trichet&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1)’s vision of economies converging behind the shield of a shared currency may be unraveling.

The gap between the interest rates Spain (http://www.bloomberg.com/apps/quote?ticker=GDBR10%3AIND), Italy, Greece and Portugal must pay investors to borrow for 10 years and the rate charged to Germany has ballooned to the widest since before they joined the euro. The difference may grow further as Europe’s worst recession since World War II hurts budgets and credit ratings across the region.

Diverging bond yields hurt Trichet’s argument that the ECB’s inflation-fighting mandate ushered in an era of stability for nations that once suffered rampant price growth. They also make it tougher for the ECB, which cut its key rate (http://www.bloomberg.com/apps/quote?ticker=EURR002W%3AIND) to a record yesterday, to set one benchmark for all 16 euro nations. That may delay recovery as governments try to fund stimulus plans...

...Trichet has asserted that the ECB, which was modeled on the Bundesbank, and the prospect of euro membership helped some nations import the credibility built up by Germany in the decades after World War II. In May, Trichet said the euro prompted a “convergence of market interest rates” to the level set by “the most credible national currencies” before monetary union...

Baltic Protests Erupt as EU’s Worst Economies Shake (http://www.bloomberg.com/apps/news?pid=20601109&sid=aa2ECfsB3GPk&refer=home)

Jan. 16 (Bloomberg) -- The Baltic countries of Latvia, Lithuania and Estonia (http://www.worldatlas.com/webimage/countrys/europe/baltic.htm) are facing unrest and street protests over government austerity measures that may make political leaders casualties of the worst economic collapse in the European Union...

...Disruptions in the former communist nations just west of Russia contrast with 2006, when the economies of the three grew faster than any others in the 27-member EU. Now, leaders are facing calls to step down over painful spending and wage cuts, enacted more than a year after the International Monetary Fund warned that an economic meltdown was looming...


And lest we think that mighty Germany will prove the exception to the financial carnage, this news from last week was just a little unsettling to say the least...



German Bond Auction Fails to Attract Enough Demand (http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ahKgmYUHo5hE)

Jan. 7 (Bloomberg) -- Germany’s sale of 10-year bunds lured the least demand in six months as investors shied away from a flood of government securities, raising the prospect of increased borrowing costs for Europe’s biggest economy.

Investors bid for 5.2 billion euros ($7.1 billion) of the bonds offered today, a level of demand that prompted the Bundesbank to retain 32 percent of the securities, according to the central bank’s Web site. European governments want to raise money to finance more than $96 billion in bank bailouts and stave off the worst of the global recession. France may sell 7 billion euros of bonds tomorrow and Ireland began marketing five-year debt today. Spain is also planning a sale.

“I would call this a failed auction,” said David Keeble (http://search.bloomberg.com/search?q=David+Keeble&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), head of fixed-income strategy in London at Calyon, the investment-banking unit of France’s Credit Agricole SA. “This was a very poor start of auction season.” ...

cobben
01-17-09, 02:07 PM
The Germans' timing is off.
You have to give the market what it wants when it wants it -
just now that is $USD denominated bonds.

Great demand in Kingdom of Sweden's new foreign currency bond (https://www.riksgalden.se/templates/RGK_Templates/NewsPage____17417.aspx)

https://www.riksgalden.se/templates/RGK_Templates/NewsPage____17417.aspx

The return of the Kingdom (SNDO) to the international capital market after two years' absence was successful. The new foreign currency bond was issued in the Eurodollar market. "We are very pleased with the execution. We saw a strong demand and the bond was broadly distributed among institutional investors world wide" says Maria Norström, Deputy Head of Funding.

Bond terms
2 billion Eurodollar 1.875 % 2012-03-12
Price: 99.876
Spread versus mid swaps: plus 25 basis points
Spread versus US Treasury: plus 87.65 basis points
Lead managers: Citigroup, JPMorgan and Nordea

In our revised budget forecast we anticipate foreign currency funding in 2009 of roughly SEK 30 billion. As early as in the second week of this year, we were offered very attractive funding terms. Therefore, SNDO decided to take advantage of the positive market sentiment to issue a new large benchmark bond in dollar, corresponding to around SEK 16 billion. The demand was very strong and the investor base was broad. 54 per cent of the bond was placed with central banks, 33 per cent with banks and 13 per cent with funds and pension funds. The market perception was most positive.

Some market comments: "Sweden's return to the dollar market after an absence was most welcome. It is rare and is held in high esteem by a broad array of investors. The deal was correctly priced and we expect it to perform very well, as all past Sweden deals have done."

raja
01-17-09, 02:52 PM
As Finster is fond of reminding us, these things are always relative.

Let us not confuse a declining confidence in the Euro, and other currencies, with some sort of improvement in confidence in the bonar.

The currencies of countries running deficits, instead of surpluses, would seem to be particularly risky over time. Why would the US $ be an exception?
1) Habit
2) Military strength
3) Political stability
4) Size

I'm not saying that in the long run the bonar won't suffer . . . . I'm saying that from an investment perspecitive, in the near future or longer, the dollar maybe best among a plethora of bad choices.

But . . . everybody's going to get poorer, no getting around that. :eek: