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Fade The US Dollar Index Rally or Go Long the V-Bottom?

May 17 2011 | 5:00 am PDT

dollarindex 300x167 Fade The US Dollar Index Rally or Go Long the V Bottom?

Morgan Stanley thinks this is a short-lived rally in a longer-term down trend.

What do you think? I know that for analysts, predictions and forecasts are their currency, so to speak. And although I don’t think they prevaricate, the price never lies.

What say ye?

Hat tip: Business Insider

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  • Manuelbravochico

    Neutral dollar here if not already long.
    Fx market not possible to predict with traditional economic anyalysis ala MS.  Fx market is dictated by money flow. It’s only one of the few markets where you can still add meaningful value,alpha  whatever you want to call it.   The rest of the markets,commods included are mainly beta warehouses.  

  • Jaytrader

    Since the buck broke out above the down trend line, closed above the various Moving Averages, etc. and signaled a technical trend change I would have to be in the bull camp until it closes back below these technical levels.
    I don’t want to be a contrarian just for contrarian’s sake, but considering the fact that the greenback is rallying and so many analysts are still bearish…doesn’t it seem that the price action has completely discounted the bear market for the US dollar now?
     
    Another point: Consider the inverse correlation between the buck and the stock and commodities markets for the last few years.  Since the commodities trend signaled a reversal (see the CCI, Goldman Sachs index, silver, crude oil, etc.) to the downside it would seem logical that the US dollar has reversed to the upside.

    I may be right…that’s what my long position is for.  But I could just as easily be dead wrong…that’s what my protective sell stops are for! 

  • http://phoenixtrader.blogspot.com/ Kshitij

    Went USD long on second candle. Lets see where it goes. Right or wrong is less useful for me. Just another betting round. The risk reward is all that counts.

    As they say,you never know till you bet !

  • Manuelbravochico

    well said.  

  • 272310662

    Well..I think it depends on what the FED is going to do largely.I believe in a long term,USA cann’t sustain a rapid growth on interest rates with that tremendous gov liabilities.
    If the gov and FED are fed up with the recession when the QE2 is done for a while.They’ll take another round of QE3/whatever…then the USA dollar will go down again,ESPECIALLY WHEN YOU CONSIDER ABOUT presidential election is coming soon…
    But ’till then,I’ll not bet…

  • Anonymous

    Agreed, long term. I think of the Junes’ trade above 7625 on size, the
    shorts who were trying to fade this move are going to get killed.

  • 272310662

    yeah.. that’s crazy…
    How about your views on China,sometimes I was confused by the F“` gov’s movement,and it’s a lot more complicated to make a prediction..
    Nowadays, China’s small entities are wiping out of business by the higher discriminational interest rates,caused by the gov actions (set the reserve against deposits to above 20% and relatively holding the interest rates of banks).
    It makes the banks pay more attention to big/red businesses and ends up with  the small ones have to borrow money from feneration.Sometimes the annual interest rates can up to 100% and a dude really killed himself by gasoline because he can never repaid the money he has borrowed !If gov’s still running this way.I think it’ll finally kill all the small entities and drops the economy into hell.But there’s another paradox,the red/big ones are still getting enough loans to keep up with their so-called investments.So I was worrying the probability of hyper-inflation..