The December Dollar Index is down 26.5 ticks at 76.335 this morning as I write. The dollar is down even in the face of rumors that some foreign central banks have been intervening to support the dollar. History suggests that interbank intervention does not work. That is why many of them, including the US gave up this practice well over ten years ago. The overall market place is way bigger than the central banks, and as I have said before, a currency drops in value over time because of some large secular fundamental. Trying to manipulate prices in the short run, doesn’t change the overall bad fundamentals of that currency and may actual create more problems. The US Dollar will continue to fall in the long run to wherever its fundamentals determine its value to be and no intervention in the market place will change that. In fact, it may make things worse. Please let the free markets work. I don’t know where that fundamental value for the dollar is, and no one else does either. We all need to let the chart tell us where that point is. In the mean time, if we want the dollar to quit declining in value vs. the rest of the world, maybe we need to get our economic house in order rather than manipulate markets. I personally think that, despite what our government leaders want us to believe that a strong dollar policy is in our best interest, in reality, our government wants the dollar to decline further in value so that our trade deficits narrow over time as our goods get cheaper to the rest of the world. Who knows?

The enclosed chart shows that the major down trend is still intact. As a matter of fact, the latest rally late last week could only rally up to the declining 5 day moving average and never could even close above that level. The directional movement indicators are still bearish. I am currently flat in the US Dollar for now. My long positions in gold are similar to being short the dollar, as far as I am concerned.

Oct. 12, 2009
David Hall