Wednesday, November 7, 2007

The Words "Crisis" and "Dollar" Appear in the Same Sentence

From Marketbeat:

“We’re in the midst of a dollar crisis here and the market is reflecting on the high cost of oil and the falling dollar and soaring gold prices,” says Peter Cardillo, chief market strategist at Avalon Partners. “The good economic news is going to be overshadowed by the dollar crisis that we’re now in.”

The reason?

The dollar fell the most since September against the currencies of its six biggest trading partners after Chinese officials signaled plans to diversify the nation's $1.43 trillion of foreign exchange reserves.

The standard method of public communication from Asian central banks is to make a public statement, deny it is official policy, but then act as is it were official policy. Here is a link to the Treasury International Capital Page that shows Asian central banks haven't been buying Treasuries that much over the last year.

The dollar's daily and weekly charts are both extremely bearish. Notice

1.) There are strong downward trends in place.

2.) All of the simple moving averages (SMAs are moving lower).

3.) The short SMAs are lower than the longer SMAs.

4.) Prices are below the SMAs, indicating the SMAs will be moving lower.

The bottom line is these are both extremely bearish charts.