Now that the greenback stands at a 10-month high against its European counterpart, the mainstream crowd is a buzz about the once forsaken currency's future investment potential. In the words of one recent news source:
"Many analysts now expect the dollar to stay firm against most currencies this year. While the US deficit is still large, prospects for recovery appear better in the US than in Europe and Japan."
They Don't Say -- after four months of dollar gains, that is. Back in late 2009, however, a "firm" performance from the dollar was the last thing those analysts expected. At the time, the buck was circling the drain of a 15-month low with the popular vote widely set on seeing the currency flushed down the pipe -- NOT fished out for another lease on life. On this, the following news items from the time paint a very bleak picture:
- "Beware The Falling $US" (Forbes)
- "It's looking like the line of least resistance [is] for further dollar weakness against the majors." (MarketWatch)
- "The dollar is not going to get any firm footing with rates at zero. It is going to continue to be the victim of carry trade. People are selling dollars and putting it in higher-yielding assets." (Bloomberg)
YET -- despite nary a budge from zero-percent interest rates, the dollar hit bottom on November 26, 2009, and has been in rallying mode since.
As for seeing the upward turn in the dollar's tide BEFORE it occurred -- EWI's Currency Specialty Service (CSS) editor Jim Martens set the bar via these timely insights:
November 6, 2009, CSS video update: Jim set the tape rolling with this Elliott wave labeled price chart of the Dollar Index, showing prices near the end of a classic A-B-C corrective decline.
Two more minutes into the video, Jim presented this magnified close-up of the dollar's Elliott wave subdivisions and voiced this message:
"Whether the final low of the correction is in place or not is not important. What is important is that we know where the bullish stance is proven incorrect... Remember, that the .618 level is not a line in the sand. A correction can retrace up to 100% of the prior movement."
After a few weeks of waiting for prices to confirm his wave count, Jim had the evidence he needed of a bullish trend change in dollar. In the December 11, 2009, CSS video update, Jim gave the official green light and said:
"Going forward, we should consider the dollar in an [up] trend. We should consider that the rallies will extend further than most people expect. I think that everything is on go for the dollar to soar to the upside" to at least the 80 area or better.