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USD to Strengthen on Double Dip Concerns?
By Mike Conlon | November 12, 2009
So I’ve kind of been looking around a bit for some sort of technical confirmation that something big may happen in USD to support a “hunch” that I have that the dollar may strengthen. Not seeing anything yet. And this is good. Because its usually opposite of how I tend to trade.
Readers of this blog know that I tend use a combination of fundamental and technical analysis, but normally I’ll find a technical set-up that I like and then do some research to see if there are any possible fundamental reasons that support my conclusions. Well now I’m searching high and low (pun intended) to find a technical set-up to support a hunch.
Not seeing the set-ups that I like. The nice thing about technical analysis is that you can ALWAYS find some sort of pattern or indicator that will confirm one direction or another, but its more important to have the patterns that you KNOW work time and time again.
We all know about the Fed’s commitment to keep rates low and therefore depressing the dollar, but the dollar could benefit from the risk-aversion trade if worries about falling into the dreaded double-dip recession ramp up. One of the main reasons why this fear may pick up is because of the removal of the stimulus programs and the pull back in quantitative easing.
In other words, the economy is going to have to stand on its own two feet. Much like a baby who’s taking his first steps, you’re always concerned about the inevitable fall. And with all of the fear out there, a fall is inevitable. How bad it is going to be is anyone’s guess.
I’ll be watching closely for technical set-ups in the dollar that may foreshadow this move, but will not be acting on the hunch. So, check back to see if I find any, and if you see your own, well you know what to do.
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