We have been playing a soft dollar in recent weeks and continue to bet on further depreciation. However, the likelihood of a short-term bounce is rising. The bearish case for the dollar remains intact: The U.S. is the weak link in an otherwise solid global economy and divergences in expected monetary policy and return on investment will act as a drag on the currency, helping to redistribute growth back to the U.S. However, the marketplace is rapidly capitulating to a weak dollar, which makes us uneasy in the near term. Our Global Investment Strategy service noted in their latest Weekly Bulletin that our capitulation index is warning of some strength. This indicator has a great track record of calling reversals and the current positioning is consistent with a dollar bounce. While the exact timing is impossible to call, traders and speculators should be prudent and tighten stops on their shorts. http://www.bankcreditanalyst.com/
I think we are very near a long term low in the dollar, for many reasons. I'm looking for a spike through 80 on the dollar index, and then a reversal back above it. Then I will start trying to build a long dollar position trade.