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US Dollar Bull Market 2009 Update - 4

News_Letter / US Dollar Jan 23, 2009 - 02:44 AM GMT

By: NewsLetter

News_Letter January 21st , 2009 Issue #3 Vol. 3

Prevailing bearishness continues against the U.S. Dollar amidst a near infinite reasons of why the Dollar is doomed. But as an active experienced trader, one thing you soon painfully learn is that the fundamentals don't count when it comes trend reversals, as by the time the reasons have become apparent the market has already moved by as much as 50% and even then there exists the continuing dilemma of the trend versus the fundamental views based on hard data. However as I have discussed several times with would be traders in that your trading the price not the indicator or data. The bottom line is that what the price says is that which only 'should' count.


The Market Oracle Newsletter
January 21st , 2009            Issue #3 Vol. 3

Commodities Currencies Economics Housing Market Interest Rates Education Personal Finance Stocks / Financials Best Analysis

US Dollar Bull Market 2009 Update - 4

Prevailing bearishness continues against the U.S. Dollar amidst a near infinite reasons of why the Dollar is doomed. But as an active experienced trader, one thing you soon painfully learn is that the fundamentals don't count when it comes trend reversals, as by the time the reasons have become apparent the market has already moved by as much as 50% and even then there exists the continuing dilemma of the trend versus the fundamental views based on hard data. However as I have discussed several times with would be traders in that your trading the price not the indicator or data. The bottom line is that what the price says is that which only 'should' count.

Whilst we are on the topic of trading, my new trading orientated site walayatstreet.com will shortly to go live which will aim to freely share my whole trading methodology developed over the past 20+ years as well as publicise trade points in addition to on-going longer-term analysis.(temporarily points to my Market Oracle archive)

It's not all fundamental gloom for the U.S. Dollar, there do exist a number of reasons that support a bullish dollar from a fundamental basis, as I elaborated upon during 2008, namely that of deleveraging, deflation and the US Dollar as the worlds reserve currency which allows the U.S. to print money without experiencing an Iceland style currency collapse, and therefore has an advantage over other distressed currencies such as the Brutish Pound. Still a trader needs to be always aware of the technical state of the market and be prepared for corrections and the possibility of trend reversals, and in that regard this update seeks to a. Determine if the US Dollar Bull market remains intact in response to price action of the past 3 months, and b. Attempt to forecast a probable trend for at least the next few months.

Brief Recap of U.S. Dollar Bull Market Updates During 2008

1. March 2008 - Dollar Bear Market Bottom called, initial target of 80. (DELEVERAGING- Gold and Commodities Teetering on the Brink of a Bear Market?)

2. August 2008 - Dollar Base building complete - breakout targeting USD 80 (The US Dollar Bull Market)

3. October 2008 - Expecting USD to correct after rallying to between 87and 90, targeting support at 80, to be followed by a resumption of the up trend targeting USD 92. (U.S. Dollar Bull Market Update)

U.S. Dollar Forecast 2009

TREND ANALYSIS - The correction following the November peak was more severe than expected this implies a weakness, however the US Dollar did hold above the previous low of 75 before resuming the up trend. Immediate resistance lies at 88, given the violence of the correction this implies choppy volatile trading in the region of between 80 and 90, this is inline with the conclusion of October 2008 with regards trend expectations for 2009.

PRICE TARGETS - The upside price target for USD remains at 90 and then 92. The USD has significant resistance above USD 92 and therefore suggests the USD will find it tough to sustain a breakout above USD 93. This suggests a trading range with an upward bias. The key here is for the USD to continue making higher lows, with the last low being 77.7.

MACD - The MACD was extremely oversold and has helped contribute to the U.S. Dollar turnaround, how-ever the MACD has some way to go before it reaches what could be termed as an overbought state and therefore implies more immediate term U.S. Dollar strength.

SEASONAL TREND - The USD Rally into January is inline with the seasonal tendency, which suggests a corrective February.

ELLIOTT WAVE THEORY - Octobers elliott wave analysis proved accurate, given the power of the corrective wave, this suggests a more complex sideways elliott wave pattern during 2009 rather than a breakout higher.

US Dollar 2009 Forecast Conclusion

The conclusion is for the US Dollar to trade sideways with an upward bias for at least the first half of 2009, as the above graph illustrates. I cannot at this time see a breakout, out of this trading range given the heavy resistance at USD 93. Meanwhile a downside breakdown appears even less probable.

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Best Regards,

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-09 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 250 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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(c) 2005-2009MarketOracle.co.uk (Market Oracle Ltd) - The Market Oracle asserts copyright on all articles authored by our editorial team. Any and all information provided within this newsletter is for general information purposes only and Market Oracle do not warrant the accuracy, timeliness or suitability of any information provided in this newsletter. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We recommend that independent professional advice is obtained before you make any investment or trading decisions. ( Market Oracle Ltd , Registered in England and Wales, Company no 6387055. Registered office: 226 Darnall Road, Sheffield S9 5AN , UK )

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