Thursday, 12 March 2009

Which way for the US Dollar - we'll find out soon

An interesting descending wedge pattern is to be found on the UDN chart which is an inverse tracker ETF for the US dollar against a bundle of major currencies. The fund is currently challenging the descending slope line and, should we see a clear break out, this would suggest that the recent trend for US dollar strength may be diminishing. This would, in turn, be another supporting factor for a continuation of the bear market rally in equities.
However for now, until proven otherwise, the larger framework for this pattern suggests that the US currency is still benefiting from de-leveraging and a dollar shortage as fund managers repatriate assets to accounts and domiciles which are ultimately dollar based.

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