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Pastimes : A Jackass, his PAL(indrome), and GOLD -- Ignore unavailable to you. Want to Upgrade?

To: Activatecard who wrote (520)	2/3/2003 2:51:35 PM
From: Jim Willie CB	Respond to of 1210

Sinclair informal interview with a currency pro There is no question that the U.S. dollar is significantly oversold. From that type of a technical situation a rally is always possible. But the question is not if we are going to have a technical bounce but can the U.S. dollar reverse its downtrend from this point. In order to get a feeling for this issue, we need to access both the technical as well as the fundamental condition of the U.S. currency, the common stock of the U.S.A. Inc. Let's elect Kenny Adams to come front and center now for his view on the USDX: Q: Kenny, what do you see for the USDX from here? A: Jim, the USDX has entered into significant long-term support between .985 and 1.00. This type of support can produce rally action. Below this level, more long-term support exists in a tighter range of .9575 to .9525. The maximum downside I can see to this leg of the dollar bear market is .90. That is not to contradict your views, Jim that the dollar could even go lower but to say in this leg, I do not see it. Kenny, by reviewing the action of the dollar during the gold bear market we have three distinct periods of that bull market. One thing is clear and that is when the dollar turns direction, like interest rates, the trend is long. Taking past history as our guide and averaging the percentage moves made by the dollar against major international currencies, you will see that my target of a minimum of 1.20 to a maximum of 1.25 on the Euro is quite possible. In terms of time then, I suspect that the dollar will be in a bear phase well into, if not all of, 2004. History suggests that when the dollar assumes a direction, the average period of time for that trend is seven years. Fundamentally, I relate the dollar's present woes primarily to the current account deficit. You may recall that I stated the fact that at a point when a current account deficit reaches the 5% level equated to GDP the currency of an industrialized nation, it will witness significant market adjustment. A recent report in the Financial Times discussed the general assumption that the U.S. current account deficit will reach $500 billion in 2002. That figure means that the U.S. must attract $1.9 billion of foreign investment every trading day. Estimates of the U.S. current account deficit for 2003 are now $600 billion. [so the lower dollar is not expected to bring about a reduction this year at all, just as I have predicted right along] The report pointed out that the Federal Reserve Board estimates that it will take a 10% fall in the dollar trade weighted to produce a reduction in the U.S. current account deficit of 1%. So to bring the U.S. current account deficit back to a manageable deficit of 3%, the U.S. dollar would have to fall to the maximum downside object that Kenny Adams points out of .90 on the USDX. That is if everything proceeds along without a hitch. [that is a dreadful ratio of 10:1, evidence of how pervasively and thoroughly our mfg capacity has shipped offshore, thus nullifying our internal mechanism to benefit from a lower dollar] So there it is. Anyone that buys the U.S. dollar here takes a flyer on a technical oversold condition lacking fundamental support. I would prefer to sell the rally than buy the dip. But that is bear market strategy in the first place.