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"We're looking at two stories in the U.S. dollar right now" (Part 1 of 2)

Our Currency Pro Service editor gives you his outlook for the dollar

by Alexandra Lienhard
Updated: June 16, 2017

Jim Martens, the editor of Currency Pro Service, tells you why his view on the U.S. dollar is "splintered" right now, in terms of strength vs. weakness.

And be sure to catch part 2 of this in-depth interview next.

 

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[Editor's Note: The text version of the interview is below.]

Alexandra Lienhard: Today on ElliottWaveTV I'm joined by Jim Martens, Elliott Wave International's Senior Currency strategist who edits Elliott Wave International's Currency Pro Service and contributes to the monthly Global Market Perspective. Hi Jim. It's been a while. Nice to see you.

Jim Martens: It has been, Alex. Pleasure to be here.

AL: And now let's start with the US dollar. Your view seems to be splintered in that you expect both dollar strength and weakness depending on the rate. So can you walk us through that?

JM: Sure Alex. And you mentioned Global Market Perspective or our GMP product. And the readers of that over the last several months have noticed a big dichotomy between the outlook for the dollar. Versus the majors -- euro, sterling, et cetera -- we've been favoring the dollar and looking for, even though there's been a bit of dollar weakness, still looking for a turn in favor of the dollar, which it seems to be coming along nicely. When we've talk about the EM currencies such as the Mexican peso or Brazil's real, it's been a different story. The dollar peaked long ago and has been declining quite sharply against those. So it's really two stories going on in the dollar right now.

AL: In your experience, is it unusual for the dollar not to be uniform in its trajectory?

JM: Well Alex, I've been following the markets for about 20 years now. And usually the confidence is highest if the dollar is moving sort of in the same direction versus most of the currencies. There's always going to be one or two. And I always highlight dollar/yen, stating that it sort of marches to the beat of its own drummer. So I don't compare that to the others. But currencies like euro/dollar, cable, dollar/CAD, Aussie dollar, I do like to see some of them moving in the same direction. And what I mean by that is either dollar strength or weakness. And we're starting to see a little bit of change there too where they're moving in opposite directions. Now my approach, though, when I'm doing my analysis is to look at each market individually. I let price speak for itself. And that's what leads me to my conclusion of market direction. But once I'm done with that first part of my work, then I move on and I compare what each outlook means, dollar strength or dollar weakness. And the more that fall in line one way or the other, the more confident I'm going to be.

AL: And Jim, another market that you've pointed out as late is the Canadian dollar. So what's your view medium-term over there?

JM: Recently we've had a breakdown in Canadian dollar. You can see the high over on the right side. So the dollar's been breaking down since about May of this year already, and is quite sharp. And that's in contrast to what we saw going back all the way to May. And if we connect the lines here, you can see that we're coming up to a lower channel line. And if that's broken, that's going to increase confidence in the idea that the dollar has peaked relative to the Canadian dollar and there is a large decline ahead of us. You can see what happened before. And I think in previous conversations we've compared this move down from the high here to that subsequent recovery. Look how sharp the decline was compared to the struggle when the US dollar was strengthening in what I think is a corrective movement. And that's in contrast to what we saw in many of the other currencies, going back to that the dichotomy we're seeing, where the dollar still probably has not peaked relative to those. But relative to the loonie, I think it has already.

AL: And Jim, the British pound has also been grabbing headlines lately, as it tends to do so. Same question, what are your thoughts medium-term?

And be sure to catch part 2 of this in-depth interview next.

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