US Dollar Bear Rallies

Adam Hamilton
February 12, 2010

In recent months, the US dollar has been surging higher. This impressive strength is a radical change from last year’s relentless grind lower. Across the globe, the majority of analysts expect this run higher to persist for a variety of reasons. This prospect is troubling traders of commodities and commodities stocks.

When the dollar strengthens, the prices of commodities denominated in it naturally tend to retreat. It takes fewer stronger dollars to buy a given unit of anything than weaker dollars. This inverse relationship is especially evident in the commodities investors and speculators love, like gold, oil, and copper. So for the commodities realm, the likely future trajectory of the US dollar is very important to consider.

With consensus for the US dollar very bullish today, I’m going to offer a contrarian perspective. Rather than being the start of a new cyclical bull, technically this dollar surge merely looks like a garden-variety bear-market rally within its secular bear. And provocatively, given bear-to-date precedent this particular rally looks mature. Odds are today’s dollar rally is either already over or soon will be.

Rest of article and analysis linked here:

http://www.zealllc.com/2010/usdxbral.htm