USD - A Big Picture View
The US Dollar is hated by nearly everyone, even its own government apparently (out of control wildcat spending) and of course the voracious American consumer who just can't wait to get his hands on ever more credits to feed his consumption habits and push the nation's current account further and further out of balance. The Fed does not hate the dollar however. The dollar is the Fed's note, its product, its means of creating limitless fiat fun - and debt. The gold bugs of course know that this entire mess is one huge Ponzi scheme, which is why they expect a dollar collapse imminently and have been since Nixon closed the gold window for good. So we are going on 4 decades of "imminently". Talk about frustration.
Sometimes I get crazy thoughts of a return to American pre-eminence, where the dollar remains king, what the US says goes and the rest of the world remains in line behind the greatest culture and most flexible economy on the planet. Seeing Huey & Dooey huddled together in Venezuela yesterday while the mighty house of Saud plays ball on crude supports such fantasies. Never mind that in reality I am embarrassed at the direction the culture is going and that fundamental analysis shows that the great elastic economy is nothing more than a result of decades of financial engineering, the matter at hand is shelf-life. How long can appearances be kept up? Answer: Nearly 4 decades and counting by my eye.
This entry will abort without coming to a conclusion other than to point out that things don't usually happen on time tables expected and that near term outcomes are often surprising. I would not be surprised to see a new blip on the radar where a great American age falls into place, even if that age only lasts months as opposed to years or decades. Long enough to get the majority of casual market watchers believing the story.
The US and many would argue the modern world appear to be at an "all or nothing" juncture. The dollar chart can be interpreted as bullish, with major support at 80 not being threatened and in fact the index readying itself to turn up from consolidation and potential bullish falling wedge. On the bearish side, with all the stimulus thus far, 85 is the best it can do? With the current levels of debt and derived leverage woven into the global economy, how much tight monetary policy can the system withstand? The chart says be patient, a strong dollar is coming imminently. But a chart is just a chart. Fundamentals say the Fed is in a box and traditional laws of economics (like say, Austrian?) will hold sway. I say this mess is and has been all about price as opposed to any kind of enduring value and as you trade and speculate, keep that in mind. A Ponzi scheme is only as good as its duration. 4 decades and counting... Chart bullish, sentiment bearish. What does that mean to you?