Dollar Rally to Reverse Multi-year Downtrend?
Aug 6th, 2008 | By Charles Delvalle | Category: Financial News, US Dollar & Forex TradingWith some currency traders expecting the Fed to push rates higher to combat inflation, the dollar has seen recent strength. But will that strength last long enough to reverse the multi-year long dollar downtrend? It’s highly unlikely.
Since March, The U.S. Dollar Index (NYBOT: DX) has been consolidating between the 70 and 74 cent range. Since mid-July the dollar has mounted a strong rise to the top of this range. But with the continued risk of more foreclosures, multi-billion dollar losses in the financial sector, ballooning deficits and a sluggish economy, the dollar will have a hard time finding traction for a long-term move.
Strong rallies in the dollar should be seen as an opportunity to take a bearish position. Of course you can do that through ownership of gold and silver, precious metals ETFs and mining stocks.
You can also play the falling dollar in the FOREX markets, if you have the experience and risk tolerance to do so. But a safer and quicker way is to buy the Rydex Weakening Dollar 2x Strategy (RYWDX). This fund increases in value by 2 percent for every 1 percent decrease in the dollar index.
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Charles Delvalle is a self-taught market-timing professional and value analyst who uses a combination of technical indicators and fundamental research to achieve consistent gains on stocks, commodities and options.
Charles is also a staunch contrarian and takes pride in finding undervalued sectors and discovering great companies on the cheap. He questions government reports and the status quo. In addition to swing trading options, Charles is also Co-Editor of the monthly advisory service - INCOME.
