Will rising dollar crush commodities?

December 9, 2015 12:54 PM


-For over four years, capital has been flowing from Europe into the U.S. Currency and Economy to get better returns.

-The rising dollar and S&P 500 crushed commodities and emerging economies over the past several years.

-Geopolitical uncertainty throughout the world is rising especially in the Middle East where now Russia and the West are taking on ISIS.

-Rapidly rising U.S. dollar caused horrible bear market in mining equities.

-High U.S. dollar is slowing down economic growth domestically which could be exacerbated by higher rates. Meanwhile, Europe and emerging economies may be bottoming and improving with the negative rates.

In May of 2011 I sent out this chart and published an article entitled, "The Euro-Dollar Dance Doesn't Fool Gold And Silver Bulls".

I predicted that the Euro made a bearish technical reversal, while the US dollar was oversold and could bounce higher to resistance. The chart clearly shows the historical inverse relationship between the Euro and the Greenback which I called the "Euro Dollar Jig". When one moves up, the other moves down.

At the time the euro ETF was trading around $140 and the U.S. dollar was hitting new lows, today four years later the currencies are in exact opposite positions. The euro is hitting new lows at $105 while the U.S. dollar is testing highs not seen since the 2008 deleveraging.

I expressed concern back in 2011 that the U.S. dollar could bounce to resistance. I never expected the greenback to get this strong and overbought testing 2008 highs with all of the trillions of dollars printed. I thought gold and silver would continue their uptrend with the dollar as a safe haven. Unfortunately, that did not occur.

I predicted back in 2011 that Europe would follow the U.S. by printing and that further bailouts of weak Euro nations would cause a decline in the euro. As I expected back in 2011 capital flowed to the oversold U.S. dollar.

Page 1 of 2
About the Author