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    MARKET EDGES

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POSITION: Selling US Dollar

Like all free-market capitalists,  I am driven to win. If I win, I don’t want to allocate a #FairShare of my winnings. If I lose, I want to be held accountable for the losses. Winning and losing in America matters.

Our business model is built on transparency, accountability, and trust. When the fundamental research and risk management facts change, I do. Last night’s State of the Union (SOTU) address was not only US Dollar bearish, it ignored the core underpinnings of what’s driven this short-term US Economic recovery altogether – Strong Dollar (the word Dollar wasn’t used once in the speech; a weak Dollar Manufacturing policy was implied).

Reflectivity: Strong Dollar = Deflates the Inflation = Strengthens Consumption = Stronger Employment = Stronger Confidence.

So why is the US Dollar up today (it was down for a week into the SOTU)? 

  1. Ben Bernanke should be less dovish in his FOMC press conference (no Qe3)
  2. Japan is moving closer to a Sovereign Debt Crisis (bearish YEN/USD)
  3. Greece lives to be socialized another day (bearish EUR/USD) 

In other words, the US Dollar could start going down again tomorrow. My process hasn’t changed - Multi-factor, Multi-Duration – within the framework of a globally interconnected marketplace. That’s what all of this is – that hasn’t changed today either.

The policy rhetoric changed last night and so has the US Dollar Index’s price. See the attached chart for TRADE and TREND lines – you’ll note that as of now the USD is bearish TRADE, bullish TREND and there’s nothing that suggests a weak US Dollar policy can’t set us up for an intermediate-term TREND line test of $78.16 support.

KM

Keith R. McCullough
Chief Executive Officer

US Dollar: Selling SOTU - 1