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The Dollar Has Never Looked so Bearish |
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Saturday, 23 August 2008 |
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By Charles Delvalle
The media has been howling about the recent rally the dollar has had. They believe that the bear run might be over. But a rally that lasts a few weeks doesn’t make a trend. And all indications point to ‘danger ahead’ if you go long the dollar.
The first thing to be aware of is that the dollar is hitting resistance in the form of an eight-year long trend line. Not only that, but once the dollar hit that trend line earlier this month, it started selling off. This shows that the dollar may not be able to break out of its eight- year bear run.
The second thing you should understand is that when you look at the RSI, MACD, and Slow Stochastic indicators, all three show the dollar as severely overbought. This gives an indication that there may be no more buyers in the market.
Lastly, inflation is high, unemployment is climbing, the budget deficit is widening, and the housing market has yet to reach a bottom. In other words, we’re probably just in the beginning of a long, drawn out recession that could last another year… perhaps two.
This makes it a good time to short the dollar. And you could easily do that by buying into the Rydex Weakening Dollar fund (RYWBX) which rises two percent every time the dollar drops one percent.
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