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Dollar Breakout?

Posted By Barry Ritholtz On June 14, 2007 @ 10:55 am In Currency,Markets,Psychology | Comments Disabled

Earlier this morning [1], we discussed the concept of oversold [1], specifically looking at bonds. Let’s now review the same concept, as applied to currency — specifically, the U.S. greenback, via this chart from Mike Panzner [2]

With sentiment towards the dollar almost universally bearish, is it any wonder that the market appears to be setting up for a major rally in the greenback?  Some fundamental factors that might be behind the move:

– the prospect that U.S. interest rates are poised to rise (further), rather than decrease as some had been expecting up until only recently

– "safe haven" buying of the greenback on the view that market conditions (e.g., volatility) and geopolitical developments are becoming increasingly unsettled

– profit-taking by U.S. investors in foreign securities, who’ve garnered substantial gains in recent months, with the procedes being repatriated to the U.S.

– indications sizeable short positions in the U.S. dollar

– chart-related buying

What does this mean? Well, let’s have a look at a chart:

Dollarbreakout [3]

Nice work Mike — thanks!

Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2007/06/dollar-breakout/

URLs in this post:

[1] this morning: http://bigpicture.typepad.com/comments/2007/06/oversold.html

[2] Mike Panzner: http://www.amazon.com/exec/obidos/ASIN/141959608X/thebigpictu09-20

[3] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/2007/06/14/dollarbreakout.jpg

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