Gold USD Euro

Back in April, we alerted subscribers that the USD appeared to be bottoming. At the time, it was floating at about 70-72 on the USDX. A whole lot has happened since then to cause this reversal, with the USD now at 78 plus on the USDX (US dollar index currency basket heavily Euro weighted). There are many reasons for the rebound of the USD and its rise is likely to continue. Many of the long term trends that acted since 2002 to weaken the USD have reversed. The exceptions are the continuing US trade and fiscal deficits, but those USD bearish forces are being overridden by these other big bullish USD drivers that have now appeared in 08. Let’s make a list of the USD bullish drivers: The US economy fell into recession starting in 07. As the other economies now slow, their currencies fall, while the USD had already done its falling on the initial recession concerns. This makes their exchange rates to the USD fall. The present turnaround of the USD goes back to the time it started its big drop, that is from around 2002, when gold was at a bottom. What this means is that if the USD is rising due to factors reversing that had been in place since 2002, the USD can rise a good bit and also for a good while. The commodity bull market since 2002 has probably peaked in mid 08 (its way down from the highs this year). The factors that drove the commodity bull market are also big long term forces and they are all reversing, hence commodities correct, and likely will continue to correct. The Euro rose a great deal since 2002 vs the USD and that is now reversing, which means the Euro has a good way to correct from here. That is very USD bullish. The EU economies are slowing rapidly, even crashing (Spain, UK, Club Med, Baltics), that is cutting the ground from the Euro. The housing bubbles there are now crashing. The Asian economies are slowing quickly, and even China is acting to support their stock markets that have crashed 60% in the last year. That is hurting commodity fundamentals. Weaker commodity prices are deflationary in general, and that is USD bullish. (I want to point out something here. When there are big swings in a market from a long bull to a bear, typically the market analysts are the last to admit the change from bull to bear as they have been so caught up tracking the bull for years. We try to consider this, and here, think it’s time to start considering tha...

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