Dollar Hits New Lows for 2009

Thursday, October 08, 2009


The dollar continued its slide today hitting new lows on the year. The bullish dollar ETF (UUP) pierced through lows intraday and closed on the exact lows of the year at $22.54. The large uptick in volume gives dollar bulls some hope for a double bottom pattern to emerge. Yet, the steep downward trend since March has shown no signs of changing as of yet.

The jump in volume hints at a possible bounce in this ETF in the short-term and perhaps a stabilization in prices. But, I remain extremely skeptical of the dollar in the long-term and still believe much lower prices are ahead. If any other governments around the world follow Australia's lead and raise rates, the dollar will find itself further devalued against other currencies. With the Federal Reserve holding rates below 0.25%, the carry trade will prove increasingly profitable further hurting the dollar.

Gold and equity markets are showing a strong negative correlation to the movement of the dollar and traders need to be watching this relationship. Gold is quickly becoming the only place for safety amid the devaluations of currencies in developed nations and the risks associated with developing nation currencies.


Post a Comment