Is the Dollar Doomed?
Mar 27th, 2009 | By Charles Delvalle | Category: Chart of the DayEven with China’s veiled threats to pursue a “new reserve currency” and even with Ben Bernanke dropping cash from helicopters, I still don’t think the dollar is heading much lower. Here’s why…
As you can see from the chart above, the US Dollar Index ($USD) has formed a nice upwards trend line that stretches back to mid-September.
Today, the dollar is hitting that support line. Also, its RSI and Slow Stochastic are both indicating that the stock is oversold and ready for a bounce higher.
Fundamentally, China won’t start dumping dollars unless they want to slam the value of its over $750 billion in treasuries it holds. China also realizes that if it begins dumping dollars, it could trigger a trade war with the US.
Both of those things are bad for China. Yet, that’s not the only reason to suspect that the dollar will remain a reserve currency for some time.
In the G20 meeting coming up on April 1, China plans to make a big deal out of creating a new reserve currency. But, if the US doesn’t want that to happen, it won’t. That’s because for the G20 to adopt a new reserve currency, it would need approval from the US (since it has veto power).
Last time I checked, the US wants to keep its reserve status. And so more than likely, the G20 meeting will be a nonevent (As far as the dollar is concerned).
The play to make is to go long the dollar and ride it back up to its previous highs. But keep a stop-loss around 82.
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Charles Delvalle is a self-taught market-timing professional and value analyst who's followed and invested in the market for the past ten years. He uses a unique combination of technical and fundamental research to pinpoint rapid profit opportunities with stocks and options.
Charles is also a staunch contrarian and takes pride in finding undervalued sectors and discovering undervalued, cash-rich companies. He frequently mocks government stupidities and points out the "inaccuracies (or lies, take your pick) that government reporting frequently dispels as "truth".
America will need a new currency before Geithner and the politicians are finished expanding the debt and destroying the dollar but the solution is a gold backed currency free of government manipulation. The Campaign to Cancel the Washington National Debt by 12/21/2012 through constitutional amendment begins. See our facebook page at http://www.facebook.com/group.php?gid=67594690498...
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