From Heinz:
Tuesday, November 02, 2004
dollar, addendum
this is a purely technical comment on the dollar - judging from the speculative net long positions in non-dollar currencies per last week's CoT report, the rational expectation would be that the dollar will soon embark on a technical rally, iow. the double-bottom support WILL probably hold.
the context is also obvious - as soon as the election results are known, the previous 'uncertainty' will be removed from the market and prompt profit taking by the hedge funds that hold these dollar short positions (they're really longs in other currencies, but the effect is the same).
the current size of these net positions is at, or close to, record highs. we can already observe a pre-emptive sell-off in gold, which foreshadows the coming dollar bounce.
the only case in which this expectation is unlikely to be met is if
1. the election result ends up being contested (highly unlikely), or
2. a terror attack occurs (which is inherently impossible to forecast, and should thus be ignored in terms of trading strategies).
of course, IF the technical backdrop that strongly argues for a certain outcome is ignored by the market, it can sometimes be meaningful, but this is not a hard and fast rule (often support gets violated for a brief period , but still holds in the end - a 'throw-over').
so it seems that for a while at least, various pre-election market trends will reverse post election. imo, contrary to what many are saying, it DOES matter who wins. if Bush is elected, the trends that prevailed during his first term are highly likely to reassert themselves (especially w.r.t. gold and the dollar). a Kerry presidency may initially be interpreted as dollar negative and gold positive, but ultimately Democratic administrations tend to be far more fiscally conservative than Republican ones (counter-intuitive, but true - the historical record on this question is quite clear), which in turn lends support to the dollar in medium to longer term time frames.
posted by pater tenebrarum at 11:10 AM
worldmarket.blogspot.com |
