Wednesday, November 16, 2016

Dollar Rally

We're talkin' 'bout the dollar bill
Now what are we all to do
When the money's got a hold on you
--Simply Red

The US dollar has been rallying on the back of last week's election results. Some high profile investors, such as Stan Druckenmiller, have voiced their bullishness about the dollar's prospects post-election.

A long term chart shows the Dollar Index doing work at the nice round resistance level of 100 with a nice multi-year cup-and-handle pattern in the backdrop. Should it break out, the USD has considerable room to run.

Conventional wisdom suggests that a strong dollar is bearish for gold, although there have been extended periods where such a negative correlation is not apparent. Moreover, central bank money printing worldwide is likely to make all historical relationships involving fiat currency less reliable predictors in the present environment.

Would think that we are likely to start hearing complaints from domestically headquartered companies that the strong dollar is hurting their ability to trade with other countries.

position in gold 

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