About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Saturday, July 29, 2017

US Dollar

In a July 4 post, I opined that the dollar was becoming increasingly oversold as negative sentiment
mounted. From a technical perspective, the USD has now reached critical support around 93 based
on weekly closing prices. The bears appear quite confident the dollar is about to break support and
head well lower.  USD Weekly

The Fed has relaxed some about tightening policy further in view of lower inflation currently,
 but it still seems determined to move away from accomodation down the road as the
economy is still expanding. Moreover, the Fed wishes to start to shrink its balance sheet soon.
With private sector liquidity  still plentiful, this may not be a disruptive event at all in
the near term, but eventual quantitative tightening (QT) will become more of a factor as the
economy matures further. The dollar bears may also regard the sharp recent recovery of the oil
price as also in their favor even though it may eventually add inflation pressure in the US. and
strengthen Fed resolve. The capital and financial markets have been relatively immune to the
continuing Trump shit storm so far, but perhaps the dollar bears are more anxious. The US, as a
matter of fact, is  just a few short steps away from a constitutional crisis over Trump's desire to
collapse the inquiries into Russian intervention in the US election and heavy hints of financial
wrongdoing that could involve Trump business entities.

The USD is now very oversold for the intermediate term and it seems a little odd that dollar
shorts coming on now would be richly rewarded after such a sharp decline has already taken
place.

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