The $ - how low will it go?

Re: spain in trouble

room305 said:

... and this will cause the dollar to fall how much? ;-)

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Just pointing out that the euro is not exactly rock solid, the more the dollar falls against it the more questions are going to be asked of it. I don't think the dollar has much further to fall against the euro, spain and italy are the achilles heel of the euro.

The €/$ is now testing 1.33, next support level 1.31, its in a strong downtrend since around the end of April.

MrKeane said:

The €/$ is now testing 1.33, next support level 1.31, its in a strong downtrend since around the end of April.

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Yeah, I came very close to being stopped out and probably will be soon. Bond selling madness continues, with the US 30-yr breaching 5.3% and the 10-yr breaching 5.26%. The media continues with its inflation obsession and "inflation will force the Fed to raise rates" ignoring the fact that core-PPI is back in the so-called "comfort zone" of 2%yoy. Must surely be entering bargain terroritory now given how vastly oversold they are. Although China and other FCBs remain a wildcard (i.e. will they start buying again or will they sell their existing holdings?)

room305 said:

Having sold half of my position prior to the ECB rate announcement I am now adding to my EUR/USD long. I think we'll bounce from $1.34 to at least $1.37 maybe further.

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Anyone betting that the dollar is going to continue falling against the euro and is prepared to bet their money on it would want to think really hard. From what Im reading the dollar has bottomed against the euro and is going to start rising again. What could cause a sharp fall in the euro are the big problems in spain which could cause a loss in confidence in the stability of the euro. Also the british pound is now way overvalued against the dollar and alot of currencies around the world. As regards interest rates if the euro falls it will give the ECB more ammunition to keep raising interest rates

joe sod said:

As regards interest rates if the euro falls it will give the ECB more ammunition to keep raising interest rates

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If the Euro interest rate keeps rising that in itself will give the currency support as it becomes a juicier carry trade.

joe sod said:

Anyone betting that the dollar is going to continue falling against the euro and is prepared to bet their money on it would want to think really hard. From what Im reading the dollar has bottomed against the euro and is going to start rising again.

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Well I want to try and take the opposite trade of the consensus view if possible. So far the trade has worked out well, having come close to being stopped out I'm now comfortably in profit.

I think the "higher rates" scare is over. The Fed will not raise their short term rates. If China continues to diversify out of treasuries we might see rising longer term rates with knock-on effects for the stock market but I don't think this will provide much support for the dollar except briefly.

It's funny how people think. For years I was reading how China's diversification out of their dollar holdings (well dollar denominated treasury holdings) would signal the death knell for the US dollar. Now it is actually happening I keep reading now how this same action will now support the dollar.

Stephen Jen of Morgan Stanley has been the most accurate of the mainstream currency analysts on the dollar. Whether this is luck or skill I don't know.This is his most recent piece published Friday(second article).

http://www.morganstanley.com/views/gef/index.html#anchor50

Basically he sees the dollar strengthening against the euro and continued Yen weakness for the present.

Summary and conclusions
We are refreshing our currency forecasts. While keeping our view on EUR/USD and USD/JPY essentially unchanged (EUR/USD to trade below 1.30 and USD/JPY to eventually break lower in 2008, conditional on several assumptions), we are revising up our forecasts for the commodity currencies (AUD, NZD and CAD). We believe that the global economy will continue to benefit from trade and financial globalisation. While there may be sporadic inflation scares, we foresee an essentially ‘Goldilocks-like’ global environment. As a result, we expect risk-taking to resume after the bond markets stabilise, and continue to believe that emerging markets (EM) should, in general, be well placed to outperform.

Bottom line
We believe that the dollar should reassert itself as the US economy accelerates. EUR/USD and cable should fall. We are patient on the JPY call, and anticipate that an outperforming Nikkei will support the JPY by this autumn. We now believe that the AUD, NZD and CAD can continue to do well, as a derivative of a buoyant Chinese and global economy.

The dollar fell again today, and the euro broke past its previous high. It broke through the $1.37 mark today.

I wonder where will this end? Surely it's hitting euro exporters hard?

Have a read of this article by David McW:

[broken link removed]

The dollar could go quite low yet!

Given the media attention the dollar is now receiving I have closed my EUR/USD long position and will be looking to open a EUR/USD short position if a decent opportunity arises in the next few days.

I've just been reading comments re the dollar/euro and am just wondering if i should convert my euros into dollars now or wait a while for a shopping trip at Christmas!!

Indeed, I was also wondering if I should do my Amazon (US) shopping now rather than closer to Christmas?

If anyone could tell you the answer to the last two questions then they would be very rich people.

No body will be able to give you a definitive answer.