IMHO, the U.S. Dollar has completed its countertrend rally and is resuming its secular bear market trend that began in 2002 when the U.S. Dollar Index was up around 120 (see chart 1). I believe by this time next year (if not sooner), it will be testing critical support around 80. Eventually, that support should give way as economic carnage comes home to roost in the good ole’ USA.
The bear market rally that began with the start of 2005 coincided with a one-time U.S. government tax incentive for U.S. corporations – repatriate dollars overseas without penalty in calendar year 2005 only. Sure enough, an estimated $300 billion of corporate earnings were repatriated. How significant was this amount? Last year’s trade deficit was around $725 billion. Yes, U.S. short-term interest rates rising in 2005 also helped.
It’s no coincidence that the countertrend rally stopped dead in its tracks as December ended because that’s when the U.S. government incentive ended as well. Yes, the “Don’t Worry, Be Happy” crowd on Wall Street, led by their five-star general and TOUT-TV’s number one Pied Piper, Larry Kudlow, have been praising and worshipping the U.S. dollar and have made a mountain out of a molehill based on the “blip” up in an otherwise long-term downtrend.
Chart 1 will show you a massive double top in the 92.5 area. Chart 2 will show you that the U.S. Dollar has been losing momentum and is gradually working lower despite all the commotion about a strong economy and interest rates going higher. I believe we can see the 88 area taken out this month and it will cause technical charts around the world to scream, “SELL!” While I don’t think the Euro or any other currency will become the dominant currency, the U.S. Dollar’s days as the world leader are over. I also believe gold has rallied in part as the ultimate alternative currency.
Peter Grandich is the Managing Member of Grandich Publications, LLC (www.grandich.com).
The company publishes The Grandich Letter (first published in 1984) which covers the metals and mining industry, follows world markets and economies, and covers the Canadian markets from an American prospective.
Grandich also provides a variety of corporate finance and development services to publicly-held companies.
Peter Grandich is also the Managing Member of Trinity Financial, Sports & Entertainment Management Company, LLC (www.trinityfsem.com), a Registered Investment Advisor in the State of New Jersey. Trinity provides investment advisory services to individuals, small to mid-size businesses, professional athletes and entertainers.
Peter is a long-standing member of The New York Society of Security Analysts and The Society of Quantitative Analysts.
The content on this site is protected
by U.S. and international copyright laws and is the property of GoldSeek.com
and/or the providers of the content under license. By "content" we mean any
information, mode of expression, or other materials and services found on GoldSeek.com.
This includes editorials, news, our writings, graphics, and any and all other
features found on the site. Please contact
us for any further information.
Live GoldSeek Visitor Map | Disclaimer
The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy
or completeness of the information (including news, editorials, prices, statistics,
analyses and the like) provided through its service. Any copying, reproduction
and/or redistribution of any of the documents, data, content or materials contained
on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC,
is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be
liable to any person for any decision made or action taken in reliance upon
the information provided herein.
