U.S. Dollar 30 May 2009

A quick update on the USD.

For the week the USD lost an additional 0.83%. This is relatively insignificant but due to Friday being the last trading day of the month there have been some significant changes to the medium and long term charts.

Specifically, both the monthly chart and the weekly chart have now signaled a bear market in the USD. As such, my investment outlook has turned more bullish on non-US currencies, foreign bond funds, stocks and commodities and bearish on the USD going forward.

Charts as follows (click to enlarge):

USD 10 year monthly:



As can be seen on the chart, a new long term bull market in the USD began in Feb/2008 when the monthly closing price exceeded the 12 month simple moving average (12 mMA).

I was expecting price to eventually achieve the 50% retracement level at 95.99 before commencing the next decline. This did not occur and the USD stalled at the 38.2% retrace level before rolling over. This is a very bearish sign.

At the close of May, price has closed below the 12 month simple moving average. As such, a new long term bear market in the USD has been confirmed and it can be expected price will attempt to retest the bottom near 70.70.


USD 3 year weekly:



Price this week closed below the 50% retrace level of the current rise from the bottom. The next line of support is the 77.69-77.93 level. Should this break price would be expected to retest the previous bottom at 70.70.

The MACD has generated a bear signal this week on a break below zero and the 13 vs 34 week moving averages are about to cross. This is bearish medium term.


USD 6 month daily:



The short term daily chart shows the declining trend channels. The USD is severely oversold in the short term and can be expected to bounce at any time. As such, I will continue to hold my USD positions short term in anticipation of the bounce. I intend upon selling into any rally in the USD.

Note the previous oversold conditions on the RSI resulted in significant bounces. However, those previous bounces would be looked upon as buy opportunities given the bullish nature of the weekly and monthly charts. Now that those charts have changed to bearish, any significant bounce in the USD short term should be viewed as selling opportunities.


Currency relative performance chart since 09 Mar 2009:



A chart of the relative performance of the various currencies since the 09 Mar 2009 stock market bottom.



Currency total return chart since 09 Mar 2009:



A different view showing the percentage gains. Interesting to note the relative underperformance of gold vs the USD as these two normally move in a close inverse relationship. This may indicate gold has gotten a little bit ahead of itself and may underperform other currencies over the near term.


Bottom Line:

The USD has technically moved to a bearish medium and long term signal. Short term it is oversold and due for a bounce.

I will be repositioning my provident fund out of USD cash and into either Fidelity International Bond fund, equity funds and/or non-USD currency funds once the USD recovers from its current short term oversold condition. Where I put those funds will depend upon the relative performance of the stock market and bond markets as the USD corrects.


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