Monday - April 24, 2006
Demand for Euros
Barron’s and Gartman have an idea of what is driving demand for Euros: “In the free-floating monetary system -- or more properly, a lack of monetary system -- currencies have become international brands, like Coke. And the dollar is showing signs of losing market share. Euro notes in circulation, especially of the €500 denomination, have increased 22% in the past year. Observes Dennis Gartman, editor of the daily Gartman Letter, a suitcase of euronotes weighs the same as one filled with $100 bills but is worth 6.1 times as much, a boon to drug dealers.”
By Arthur B. Hill - Mon 24-Apr-06 at 03:25PM in US Dollar
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Wednesday - April 05, 2006
Dollar Gets Hammered
The US Dollar Index was not a happy camper Tuesday and the index actually weakened while rates advanced over the last 5-6 weeks. Rising interest rates are bullish for the greenback and the inability to rise in the face of good news is bearish. The index broke rising wedge support in mid March, formed a lower high and declined sharply over the last four days. This setup is bearish and points to further weakness.
By Arthur B. Hill - Wed 05-Apr-06 at 02:50PM in US Dollar
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Friday - September 16, 2005
Dollar Testing Resistance
The falling flag remains in place and the US Dollar Index is testing upper trendline resistance. Technically, the index broke above the trendline, but I will not be impressed (bullish) unless there is a break above 89. Such a move would signal a continuation of the prior advance and target an advance to around 96. Show me the breakout first. The long term gold outlook is featured in this week's TDT Report (click here)
By Arthur B. Hill - Fri 16-Sep-05 at 02:27PM in US Dollar
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Monday - September 12, 2005
US Dollar Index
The US Dollar Index is getting a lift today and a rise in interest rates could keep the green back strong. Higher interest rates attract more money and this money must be concerted into US Dollars to be invested in bonds. The decline over the last two months looks like a falling flag and the index found support around broken resistance (85.5). Even though the falling flag is a bullish correction, we need a breakout for confirmation. A move above the upper trendline and resistance at 89 would signal a continuation higher. Such a breakout would be negative for gold and gold stocks.
By Arthur B. Hill - Mon 12-Sep-05 at 06:52AM in US Dollar
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Tuesday - July 26, 2005
Dollar Power
Despite a revaluation of the Yuan, the US Dollar Index remains strong overall and the current trading range looks like a pennant. After an advance, these are bullish continuation patterns and a break above the upper trendline (90.5) would signal a continuation of the advance.
A move below the pennant low (88) would be negative, but not enough to reverse the current uptrend. For that, I would wait for a break below the March trendline and June low. Even though the relationship is under challenge, I would view Dollar strength as bearish for gold.
By Arthur B. Hill - Tue 26-Jul-05 at 07:35AM in US Dollar
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Thursday - May 12, 2005
US Dollar Breakout
The US Dollar Index held firm and broke above the May-04 trendline. In addition, there are two bullish patterns at work. First, the index broke symmetrical triangle resistance with a long white candlestick yesterday. Second, the pattern since early February looks like a cup-with-handle. This is a bullish pattern and a move above the February high would provide confirmation. Given the choice (Dollars, Euros or Yen), I think the currency markets prefer Dollars and the US economy at this point.
By Arthur B. Hill - Thu 12-May-05 at 04:42PM in US Dollar
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Wednesday - April 27, 2005
Euro Sabotage
Bloomberg (click here) columnist Mark Gilbert reports that the bond vigilantes are circling the wagons on the prospects that France will reject the European constitution in a referendum. In a poll by L’ Express magazine, 58% of respondents were against the EU constitution. The EU constitution requires the approval of all 25 EU member states and France represents the one of the most important members. Without France there could be no European Union.
My interest is not so much in the EU or the constitution, but rather the affect on the US Dollar and hence gold. Perhaps the Euro would rally in the face of a French rejection. After all, this would slow the whole process down and stall new entries that might further dilute the Euro. However, I really don’t see how a NO vote could be taken as Euro positive because a NO vote is a vote for chaos and uncertainty. The Euro has been riding high, but I think a French NO vote would derail the currency. This would bolster the US Dollar Index and weaken gold.
On the US Dollar Index chart, it is clear that a move above 86 would be hugely positive and this level bears watching by the gold bugs.
By Arthur B. Hill - Wed 27-Apr-05 at 07:50AM in US Dollar
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Monday - April 04, 2005
Dollar, Fed and Oil
In SmartMoney, Dan Luskin responds to the Goldman Sachs report that raised the oil target range to $55-105. Luskin implies that high oil prices are a result of inflation and not any real increase in demand or a decrease in supply. His main argument is that inflation led to a falling Dollar and the weak Dollar is the reason for high oil prices. Luskin’s prediction is that the rise in oil prices will cease now that the Fed has started to fight inflation. With the Fed fighting inflation, interest rates will rise, money will become tight, the US Dollar will rise, oil will fall and other commodities will come under pressure.
My view: I think Luskin’s arguments for strength in the US Dollar Index are robust, but am not convinced when it comes to oil. Oil is priced in Dollars. Therefore, the cost of oil rises when the US Dollar falls. As these charts show, there is a clear correlation between the price of oil and the US Dollar Index over the last three years. However, I would prefer to focus on oil for oil the US Dollar Index for the US Dollar Index. In other words, the price chart for oil should provide the answers needed. The price remains in a strong uptrend and the upper trendline of the rising price channel extends to $105 at the end of 2006.
By Arthur B. Hill - Mon 04-Apr-05 at 02:52PM in US Dollar
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