Monday, January 5, 2009

Dollar weekly chart

One of the things I'm watching is if the dollar can close back above the 200 week moving average on a weekly basis. With the strong move up today it is again knocking on the door.

It's been over six long years since the dollar has been above this level. The fact that it has moved back above and is threatening to do so again would suggest that something different is going on.

Even though the Fed is printing money like it's going out of style the dollar is not responding like it has for the last half decade.

I think the difference is that we are now experiencing deflation. I've got to say that finding a dollar bull these days is like trying to find a needle in a haystack. Needless to say they are few and far between. That by itself makes me leery about being on the short side.

As long as the dollar holds above the 200 WMA then I'm going to assume that deflation is still in the drivers seat. As long as that's the case all other asset classes are probably going to struggle.