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US Dollar: Deja Vu Doom
Bearish sentiment for the dollar sends a familiar message

By Nico Isaac
Mon, 11 Oct 2010 18:30:00 ET
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It is definitely NOT easy being green these days, particularly when said color pertains to the US greenback. Right now, the dollar is treading the waters of an 8-1/2 month low against a basket of the world's leading currencies.
As far as many mainstream experts can see, continuing to hold tight to a bullish case for the dollar  is akin to the captain of the Titanic going down with his sinking ship. Consequently, in the week ending October 5, 2010, speculators boosted bets against the dollar to $30 billion -- yes, billion -- the largest shorting of the buck since June 2008, according to the October 6 Commodity Futures Trading Commission report.
Ask me, and it's beginning to feel an awful lot like dollar déjà vu doom; i.e. the bearishness surrounding the dollar today is nothing new. Take late 2009, for example. Back then, the US currency was far weaker in value than it is today when market-goers were leaping off the buck like fleas from a dog treated with Frontline.  Here, the following news items from the time say plenty:
  • “The US Dollar’s reign as the world’s reserve currency is about to come to an abrupt end.” (Daily Times)
  •  “Financial experts say there’s no end in sight to the slide. The traders we talk to have a grim outlook on the US dollar’s future overseas.” (Hartford Courant)
  • "Beware The Falling $US" (Forbes)
  • "It's looking like the line of least resistance [is] for further dollar weakness against the majors." (MarketWatch)
YET -- on November 26, 2009, the dollar hit bottom and took off in a powerful, seven-month rally to star-gazing heights in early June 2010.
(How Low Will the Dollar Go? The October 2010 Financial Forecast Service offers the most comprehensive insight into the near- and long-term trends under way in the US currency. Get the complete service today, absolutely risk-free.)
Bottom line: Bearish sentiment for the buck TODAY is greater than it was in late 2009 -- even though prices are higher. To illustrate this paradox, the October 8 Short Term Update presents the following year-to-date close-up of the dollar versus Daily Sentiment Index (courtesy of www.trade-futures.com)

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