U.S. Dollar in descending Triple Bottom Breakdown.

[KentPaul]

well tango i think we can agree that is you are goign to short the dollar go long on a strong emerging market currency....

i think there is a a lot of risk going long on the euro or cad at the moment. its a very crowded trade. aside from active investors the CTAs are mostly long on it.

in term sof the short yen carry trade, the dominating participants are jap retail investors, not hedge funds.

 

[MadRat]

This explains the optimism in the stock markets. Your downward surge this past two days was probably a surge in money flow to the foreign money markets.

 

[Genx87]

Originally posted by: laFiera

Originally posted by: senseamp
Declining dollar is good for competitiveness of US goods overseas. That is why Japanese and Chinese aren't allowing dollar to fall relative to their currencies.

and what goods does the usa make lately?

We export ~1 trillion worth of goods each year and consume about trillions internally. We must make something.

 

[imported_Tango]

Originally posted by: KentPaul
well tango i think we can agree that is you are goign to short the dollar go long on a strong emerging market currency....

i think there is a a lot of risk going long on the euro or cad at the moment. its a very crowded trade. aside from active investors the CTAs are mostly long on it.

in term sof the short yen carry trade, the dominating participants are jap retail investors, not hedge funds.

If you are interested I have been long on emerging markets equities for the last 5 years. At a certain point my equity portfolio was 85% EMs (I wouldn't advice anybody to do so, though). I am from a certain perspective long on their currencies too, in the fact that I do not hedge against their currency risk. But apart from that I have not been actively taking positions in the Forex for 15 months now. I just avoided buying protection on foreign currency risk against the dollar, which some years ago I would have instead done. It's something close to a mild short position on the dollar. I like a lot some emerging market debt, especially former-soviet-union banks. But a lot of the potential has been seized already. The prices of sovereign debt originated in emerging markets are often ridiculous, such as in the case of Russia or Brazil.

As I said, I have now somewhat balanced my portfolio a little, but I still only have two US based companies in it, the reduction in EMs went mostly to western and eastern europe. As I said, some valuations in China now reached a point where they look just crazy, especially when you compare them to strong companies in Russia for example with very low multiples. They look much a safer bet.

But my point of view is somewhat skewed by the fact that I live part of the year in Europe and still consider the Euro a currency affecting my day-to-day purchasing power.

I have to do portfolio analysis for my job and I often reach for clients different conclusions from the ones I support when dealing with my personal strategies.

But you are right, opening long positions on the Euro right now would be a very risky strategy, with a lot of downward potential.

You are right about the carry trades being in fact mostly Japanese domestic investors. But still they often have US debt as the long side of the trade. This should in fact support the dollar, although the real impact of carry trades on a huge market such as the Forex is still quite debatable. Most trades on the Forex happen for reasons completely unrelated to speculative strategies. Companies have to protect themselves for future payments in foreign currency etc etc...

A sector with a lot of potential in my opinion, right now is Asian real estate

 

[Genx87]

Originally posted by: GrGr

From Bloomberg:

Dollar Falls to Lowest in Two Months on U.S. Mortgage Concerns

By Ron Harui

July 24 (Bloomberg) -- The dollar fell to the lowest in two months against the yen and the weakest versus the British pound in 26 years on concern U.S. subprime mortgage losses will worsen.

The U.S. dollar declined against 14 of the 16 most-active currencies on speculation a National Association of Realtors report tomorrow will show U.S. existing-home sales dropped last month to the lowest in four years. Federal Reserve Chairman Ben S. Bernanke testified before Congress last week that there will be ``significant'' losses on loans to homeowners with poor credit.

``The subprime problems in the U.S. may deepen,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd. ``It's a minus for the dollar.''

The Fed's major currency trade-weighted dollar index fell to 77.01 on July 20, the lowest since 1971, from 77.15 on July 19.

Looks like the downward slope is really slippery for the dollar.

Goldman and Sachs and others believe oil will hit $ 95 dollars (possibly $ 100) a barrel towards the end of the year. That is bound to put more pressure on the euro and cad to strengthen isn't it, and serious downward pressure on the dollar.

Also China's role as the world's inflation sink is coming to an end. The Chinese know want the Yuan to strengthen and may start to export inflation instead of importing it. China has simply stopped building up their huge dollar forex reserve and will put the new dollars they earn into circulation instead.

China's Exported Inflation May Signal Interest-Rate Pressures

By Simon Kennedy and John Fraher

Yangshan Deep Water Port, near Shanghai July 23 (Bloomberg) -- The rising cost of goods the U.S. imports from China may be an early warning signal that central bankers from the U.K. to India are about to pay a price for a cause they've championed: globalization.

China, a source of cheap manufactured products for the past two decades, may be starting to export inflation as the world economy grows at the fastest pace in a generation.

Like the last two years when these analysts were telling us 100 bucks by the end of the year. I expect the same result. ~2 dollar gasoline right around the 1st of Jan. Driving season is coming to an end in a month and the summer blends will also not be required.

 

[imported_Tango]

Originally posted by: Genx87

Originally posted by: laFiera

Originally posted by: senseamp
Declining dollar is good for competitiveness of US goods overseas. That is why Japanese and Chinese aren't allowing dollar to fall relative to their currencies.

and what goods does the usa make lately?

We export ~1 trillion worth of goods each year and consume about trillions internally. We must make something.

Of course. The US is still the largest economy in the world. But you must look for changes in flows. Trends. In the '80s the US was a net exporter, now it's a net importer.

 

[Genx87]

Originally posted by: Tango

Originally posted by: Genx87

Originally posted by: laFiera

Originally posted by: senseamp
Declining dollar is good for competitiveness of US goods overseas. That is why Japanese and Chinese aren't allowing dollar to fall relative to their currencies.

and what goods does the usa make lately?

We export ~1 trillion worth of goods each year and consume about trillions internally. We must make something.

Of course. The US is still the largest economy in the world. But you must look for changes in flows. Trends. In the '80s the US was a net exporter, now it's a net importer.

Ok and?

 

[KentPaul]

i work as a hedge fund analyst, but we normally let the managers do the allocations rather than buying a lot of niche managers which is not practical for us due to our investment size.

my pa account has a handful of exploration stage energy and resource stocks, becore that i had a mixture of underowned large caps.

 

[imported_Tango]

Originally posted by: Genx87

Originally posted by: Tango

Originally posted by: Genx87

Originally posted by: laFiera

Originally posted by: senseamp
Declining dollar is good for competitiveness of US goods overseas. That is why Japanese and Chinese aren't allowing dollar to fall relative to their currencies.

and what goods does the usa make lately?

We export ~1 trillion worth of goods each year and consume about trillions internally. We must make something.

Of course. The US is still the largest economy in the world. But you must look for changes in flows. Trends. In the '80s the US was a net exporter, now it's a net importer.

Ok and?

Current account deficits put downward pressure on your currency, current account surplus conversely put upward pressure on your currency. Of course this is just one among many other factors.

 

[KentPaul]

current account surpluses and deficits have a low power of predicting currency direction, they only have an effect on what was going to happen anyway, and that is determined by portfolio flows and corporate and central bank activity

 

[LegendKiller]

Originally posted by: Perry404

perry its just a line on a chart, nothing more nothing less....

Uh-huh

Originally posted by: KentPaul


for the record my job involves investing into hedge funds, and most of them think the usd is undervalued against the EUR, CAD and JPY. but it takes time and interest rate differentials for currencies to mean revert around 'fair value'.

For the record i don't really buy into that at the moment. In my personal opinion, because of an expensive war, i think there is a huge amount of money printing going on behind the scenes. This will result in a great deal of hidden inflation. I fully expect the dollar to seek out new support levels not seen for a very long time(if ever).
But then...what do i know...

I really don't believe in technical analysis. You can chart all day, but in the end, most studies have shown that it isn't any better then just reasonably picking a side. All of this "price support" and "resistance points" and crap like that is really...crap.

The dollar will fall for your reasons, but no amount of technical analysis is going to help help you determine where it'll stop. There's no correlation but any successful landing in that area is seen as proof of concept, which is statistically untrue.

 

[imported_Tango]

Originally posted by: LegendKiller

Originally posted by: Perry404

perry its just a line on a chart, nothing more nothing less....

Uh-huh

Originally posted by: KentPaul


for the record my job involves investing into hedge funds, and most of them think the usd is undervalued against the EUR, CAD and JPY. but it takes time and interest rate differentials for currencies to mean revert around 'fair value'.

For the record i don't really buy into that at the moment. In my personal opinion, because of an expensive war, i think there is a huge amount of money printing going on behind the scenes. This will result in a great deal of hidden inflation. I fully expect the dollar to seek out new support levels not seen for a very long time(if ever).
But then...what do i know...

I really don't believe in technical analysis. You can chart all day, but in the end, most studies have shown that it isn't any better then just reasonably picking a side. All of this "price support" and "resistance points" and crap like that is really...crap.

The dollar will fall for your reasons, but no amount of technical analysis is going to help help you determine where it'll stop. There's no correlation but any successful landing in that area is seen as proof of concept, which is statistically untrue.

Hehe.. interesting. Technical analysis is always something dividing people into clear categories of believers and non believers. I heard crazy arguments both in favor and against it. For some people it's really like a religion.

A lot of academic studies will tell you technical analysis simply does not work. A lot of wall street traders will tell you technical analysis does in fact work and it's the holy grail. Academia believes (most of it) in efficient markets. But efficient the markets are not. And this is not much, but it's for sure.

The truth is (like always) somewhat in the middle. Technical analysis is a little bit like ancient alchemia: it works but not for the reasons you think it does.

Many studies about technical analysis demonstrating it doesn't work often look for wrong things or start from wrong assumptions. This is because for someone in academia something must work always... or never.

Do technical analysis predict what the price of a stock will be next year? No. But it can tell you many other things. For example when a major inversion in a trend is coming. If you look for 50 and 200 days moving averages intersections you very rarely fail. And of course there are very sophisticated models that can be build on technical elements.

In the medium term, I heard very few active portfolio managers say they ignore technical elements. Everybody keeps a close eye on the 200 days moving average for example, or on the relative strength index. Even those who kinda disbelief technical analysis as a science, in the end have the 200 EMA plotted on their charts.
If only just for behavioral patterns you just can't ignore what other people don't ignore. The Chinese index has been rebounding on its 50 days moving average for years now, very clearly. The day it moves below it you'll see a lot of short positions being placed. Right or wrong from a theoretical point of view, it'll happen.

Technical analysis is just a marginal aspect of the valuation process, but it has its weight, and shouldn't be discarded completely. Every piece of information is worth something.

 

[HeXploiT]

Originally posted by: LegendKiller

Originally posted by: Perry404

perry its just a line on a chart, nothing more nothing less....

Uh-huh

Originally posted by: KentPaul


for the record my job involves investing into hedge funds, and most of them think the usd is undervalued against the EUR, CAD and JPY. but it takes time and interest rate differentials for currencies to mean revert around 'fair value'.

For the record i don't really buy into that at the moment. In my personal opinion, because of an expensive war, i think there is a huge amount of money printing going on behind the scenes. This will result in a great deal of hidden inflation. I fully expect the dollar to seek out new support levels not seen for a very long time(if ever).
But then...what do i know...

I really don't believe in technical analysis. You can chart all day, but in the end, most studies have shown that it isn't any better then just reasonably picking a side. All of this "price support" and "resistance points" and crap like that is really...crap.

The dollar will fall for your reasons, but no amount of technical analysis is going to help help you determine where it'll stop. There's no correlation but any successful landing in that area is seen as proof of concept, which is statistically untrue.

No and i never offered any suggestion that that TA would tell us the future. I merely stated that breaking .80 is a sign of weakness.
There is no prediction here however many people do quite well financially using TA in conjunction with other investment strategies.

 

[KentPaul]

perry, more sellers than buyers is normally a sign of weakness, but that doesnt predict what will happen next.....

 

[HeXploiT]

Originally posted by: KentPaul
perry, more sellers than buyers is normally a sign of weakness, but that doesnt predict what will happen next.....

Again...i have not made any predictions.