Tags: dollar

Floor is Set On the Dollar For Now

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Tuesday, 04 Aug 2009 03:27 PM Current | Bio | Archive

After yesterday’s downward move in the dollar index, I’m convinced, on a technical basis, the downtrend in the U.S. dollar index shouldn’t continue for much longer.

The mostly overlooked but nevertheless important Daily Sentiment Index showed only 5 percent dollar bulls on a short-term basis, 8.7 percent on a 10-day basis, and 12.4 percent on a 30-day basis.

There are very few who have optimistic expectations for the dollar on a short-, intermediate-, and long-term basis. Now, when the upturn occurs, as it will, because of risk aversion coming back, it should result in a multi-month advance.

Yesterday, the dollar index declined beneath the December 2008 low of 77.69. It was up in a reverse move to the 0.618 retracement of the entire push up from the March 2008 bottom of 70.70.

I’m not saying the actual wave down couldn’t slip further, but I am saying that all the technical requirements now have been met to expect a major upward reversal.

Without any doubt, this will have its implications beyond currencies on commodity and equity prices, but then, of course, in the opposite direction.

Besides that, we just learned that personal income fell a sharp 1.3 percent after jumping a revised 1.3 percent in May. The drop was worse than the consensus forecast for a 1.1 percent decrease. June's fall was primarily due to a 5.9 percent fall in transfer payments which had spiked 8.0 percent in May from one-time payments under the American Recovery and Reinvestment Act of 2009.

In the latest month, the wages and salaries component dropped 0.4 percent after dipping 0.1 percent in May. Consumer spending was up 0.4 percent, mostly due to higher gasoline prices, after edging up 0.1 percent in May. The headline PCE price index spiked 0.5 percent, following a 0.1 percent uptick in May.

Meanwhile, the core PCE price index firmed, as expected, to a 0.2 percent increase in June after edging up 0.1 percent in May.

Today's report shows the consumer sector getting hit hard in the wallet as income fell and prices rose.

For sure, as things are today, the consumer can’t make whatever recovery will happen sustainable.

After yesterday’s downward move in the dollar index, I’m convinced, on a technical basis, the downtrend in the U.S. dollar index shouldn’t continue for much longer.

The mostly overlooked but nevertheless important Daily Sentiment Index showed only 5 percent dollar bulls on a short-term basis, 8.7 percent on a 10-day basis, and 12.4 percent on a 30-day basis.

There are very few who have optimistic expectations for the dollar on a short-, intermediate-, and long-term basis. Now, when the upturn occurs, as it will, because of risk aversion coming back, it should result in a multi-month advance.

Yesterday, the dollar index declined beneath the December 2008 low of 77.69. It was up in a reverse move to the 0.618 retracement of the entire push up from the March 2008 bottom of 70.70.

I’m not saying the actual wave down couldn’t slip further, but I am saying that all the technical requirements now have been met to expect a major upward reversal.

Without any doubt, this will have its implications beyond currencies on commodity and equity prices, but then, of course, in the opposite direction.

Besides that, we just learned that personal income fell a sharp 1.3 percent after jumping a revised 1.3 percent in May. The drop was worse than the consensus forecast for a 1.1 percent decrease. June's fall was primarily due to a 5.9 percent fall in transfer payments which had spiked 8.0 percent in May from one-time payments under the American Recovery and Reinvestment Act of 2009.

In the latest month, the wages and salaries component dropped 0.4 percent after dipping 0.1 percent in May. Consumer spending was up 0.4 percent, mostly due to higher gasoline prices, after edging up 0.1 percent in May. The headline PCE price index spiked 0.5 percent, following a 0.1 percent uptick in May.

Meanwhile, the core PCE price index firmed, as expected, to a 0.2 percent increase in June after edging up 0.1 percent in May.

Today's report shows the consumer sector getting hit hard in the wallet as income fell and prices rose.

For sure, as things are today, the consumer can’t make whatever recovery will happen sustainable.

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After yesterday’s downward move in the dollar index, I’m convinced, on a technical basis, the downtrend in the U.S. dollar index shouldn’t continue for much longer. The mostly overlooked but nevertheless important Daily Sentiment Index showed only 5 percent dollar bulls on...
dollar
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2009-27-04
Tuesday, 04 Aug 2009 03:27 PM
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