The US Dollar Run Up, Too Far, Too Fast

Posted by: : Paul EbelingPosted on: February 24, 2015 The US Dollar Run Up, Too Far, Too Fast

The US Dollar Run Up, Too Far, Too Fast

The Buck may be due for a pullback as the Federal Reserve is concerned about the rapid rise in the its value, which is backed by nearly universal Bullish sentiment.

“The trade-weighted dollar may have just risen a bit too far and a bit too fast,” David Rosenberg, chief economist at Gluskin Sheff & Associates Inc., said. “A 17% appreciation over a half-year period has only happened three other times in the past and never did prove to be sustainable.”

The USD has gotten more valuable as the Fed wound down the trillion-dollar quantitative easing program that had kept borrowing costs low. The central bank wanted to boost the economy by encouraging consumers to spend their money, not save it, and by providing businesses with a less expensive source of investment capital.

The future direction of borrowing costs has become a source of major economic debate, with some Fed officials arguing for higher interest rates and others expressing concern about a stronger USD.

We have some big trades lined up for this week so join us in the Live Trading Room, Trade Sukuks, Treasuries, FX, Equities and Options with the World’s Leading Platform Open an account here , call us at 312 219 1354, or email us to get started.
Join the Live Trading Room

“The Fed became more vocal on how the dollar is acting as a constraint on growth and this is playing out in the trade data which are subtracting a point per quarter from GDP growth,” Rosenberg said on 20 February.  GDP is calculated by adding together the value of the trade balance, government spending, consumer expenditures and business investment.

As evidence of USD bullishness, Mr. Rosenberg points to the near-record level of 70,000 net Length positions in USD futures traded on the Intercontinental Exchange (NYSE:ICE).

“There has not been a week since the end of May 2014 where the speculators have been net Short the greenback,” Mr. Rosenberg said. “What happens if they start to take some profits [and they will]?”

Looking back 4 yrs, the best time to get Bullish the Dollar was when the currency was completely shunned at the beginning of Y 2011 as the US economy stalled out.

“That was when it made sense to turn Bullish the Dollar,” Mr. Rosenberg said. “Ah, the beauty of hindsight.”

A prolonged period of lower interest rates will lead to USD weakness.

Stay tuned…


Paul Ebeling

The following two tabs change content below.

Paul Ebeling

Pattern Recognition Analyst, equities, commodities, forex
Paul Ebeling is best known for his work as writer and publisher of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly-regarded, weekly financial market letter, where he enjoys an international audience among opinion makers, business leaders, and respected organizations. Something of a pioneer in online stock market and commodities discussion and analysis, Ebeling has been online since 1994. He has studied and worked in the global financial and stock markets since 1984.

Trade FX, Equities and Options with the World's Leading Platform , call our trade desk 631 482 0376, or contact us to get started.

Research 1 of 6

Get the News Delivered Every Morning:

Delivered by FeedBurner

mbs 1 BATK-banner-1

Recent News