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Death of the U.S. Dollar?
Not so fast: We've been here before.
The U.S. dollar is toast. Stick a fork in it. It's done. Look at these headlines:
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UN wants new global currency to replace dollar -- The dollar should be replaced with a global currency, the United Nations has said, proposing the biggest overhaul of the world's monetary system since the Second World War. (Sept. 8, Telegraph.co.uk)
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Dollar hits low for year as gold tops $1,000 an ounce -- The dollar fell to a low for the year Tuesday as gold prices shot past $1,000 an ounce... (Sept. 8, AP)
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FOREX -- U.S. dollar slides to 2009 low vs euro (Sept. 8, Reuters)
Seems like the buck has nowhere to hide. But wait -- we've been here before.
Three years ago (early 2006), nearly all forex market observers called the “unexpected strength of the U.S. dollar” in 2005 one of that year's "biggest surprises” (FT). Remember? Despite all the “crash and burn” forecasts so popular in late 2004, “the greenback enjoyed its best year against the euro and yen since 1999 and 1979 respectively." So unexpected was the 2005 rally that even Warren Buffet, the Sage of Omaha who famously bet “$20 billion or so” against the buck, was reportedly caught off guard by its sudden and sustained turnaround.
Here we are again. But as you see in this chart from the September 4 issue of EWI's Monday-Wednesday-Friday Short Term Update, the Daily Sentiment Index reading for the EUR/USD, the most widely-traded currency pair, is in the mid-90s. Notice that recent tops in the euro-dollar exchange rate came when the DSI was similarly overbought:
And then there are Elliott wave patterns. Just as the dollar hit fresh lows in December 2004, we published this chart, below. That topping wave pattern was why we had forecast what forex analysts later referred to as the “biggest surprise” of 2005:
9 Biggest Forex Pairs, 24 Hours a Day. That's the intensity of forecasts you get with EWI's Currency Specialty Service. Details.
What about the EUR/USD's current Elliott wave patterns, you ask? Our intensive Currency Specialty Service studies them daily, and its latest forecast (online now) shows you two probable wave counts -- and both place the EUR/USD's latest rally in a fifth wave position.
Bottom line: Conventional forex analysts can analyze the USD's “bad fundamentals” till they’re blue in the face, but "fundamentals” obviously didn't matter in 2005. So don’t let them tell you, “this time it’s different” -- we’ve heard that before, too.
The U.S. dollar's Elliott wave picture and sentiment readings say what you really need to know. EWI's intensive Currency Specialty Service can tell you now where it's likely headed next.