I have been anticipating a bounce in the US dollar index even while expecting the US dollar to trade lower vs. the Yen.



Many have asked why. The answer centers around a dislike of the Euro and British Pound. So before proceeding with thoughts about flexibility, let's stop for a moment and take a look at a few of my reasons to dislike the Euro and the Pound vs. the US dollar.



German banks are arguably as bad off if not worse than US banks.

Property bubbles in parts of the Eurozone are worse than in the US, Spain being the primary example.

The property bubble in the UK is as bad if not worse than the US.

Anti-dollar sentiment is extreme.

The Euro has benefited from a huge diversification out of dollars especially from oil producing states. At some point diversification will end.

There is still a prevailing attitude that the US will enter recession and somehow the Eurozone and UK will avoid that recession. I do not support that view.

There is a prevailing attitude that Bernanke will keep slashing rates to zero while the ECB will hold the line. I suspect the ECB will start cutting rates and at some point the Fed will pause to consider.



Viewpoints vs. Trading Positions

US Dollar Daily Chart

$XEU Euro Daily

Gold Confirmation Context

Sentiment in gold seemed to be hitting extremes.

Seasonality



Reader Questions On Gold And Silver

A Time To Go Long Equities?

Wal-Mart (WMT) Weekly Chart

What's In and What's Out?

Gold and Silver are out.

Energy is out.

A bounce in equities with a concentration on value plays is in.

A bounce in the US dollar is in.

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