Let's get one thing straight: The "safe-haven" status of a financial market cannot change as suddenly as a runway model's designer duds. Meaning: A certain asset cannot provide shelter from the credit storm raging across Wall Street one minute -- only to lay battered and broken among its list of casualties the next.
If only the mainstream experts could see that. Case in point: The ongoing back-story surrounding the U.S. Dollar, starting in early November 2008. Back then, the dollar was the king of the currency world, having wrapped up its strongest monthly gains in more than 17 years to see prices soaring at a fresh, two-year high.
And, according to the go-to-guys/gals of Main Street, the buck's good luck had everything to do with its built-in "disaster premium." On this, the following news items from the time speak volumes:
· "Dollar soaring as investors seek haven for cash." (Bloomberg)
· "US dollar makes a stunning comeback, boosted by concern about a deteriorating global economy." (AP)
- "The dollar remains the premier currency…there has been a lot of interest in the safe haven and liquidity of money markets." (Fed Chairman Ben Bernanke)
YET -- from its November 21 peak, the dollar turned down in a stomach-churning selloff that included its steepest five-day decline against the euro since the 15-nation currency came into existence in 1999.
As the greenback's slide continued, and prices circled the drain of a two-and-a-half month low, the term "safe-haven" was suspiciously missing in action. See mid-December news stories below:
- "The dollar has returned its focus to the surrounding malaise in the US economy and the certainty that things will get much worse before they get better." (Irish Times)
- "Bleak economic data finally took its toll on the US currency. The dollar just took a wallop today." (WSJ)
- "A lot of the reasons the dollar went up are not sustainable and have started to disappear. Rapid deterioration in the US economy…does not bode well for the dollar." (CNNMoney.com)
YET, again: From its December 18 low, the dollar took step one UP of a powerful rally that has so far taken prices to a new, three-month high. "Safe-haven" once more? You betcha.
Enough is enough. Investors need clear, consistent, and objective analysis of the U.S. dollar. AND, one day before the currency's most recent trend change (the December 18 low), the December 17 Short Term Update presented the following close-up of the index and wrote: "The dollar's next support range is 77.48-77.87. The index will likely come down to this area before a meaningful low is attempted."
24 hours later, the dollar landed right into our cited range and began its sustained rebound.
See where the world's leading currency could be in due time. Click
Here for a
Financial Forecast Service subscription, absolutely risk-free.