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The "We need a strong Dollar" Story

Written by A Forex View From Afar on Thursday, March 13, 2008

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The "We need a strong Dollar" Story had reached Mr. Bush, after it was said in every possible way and surroundings by Mr. Paulson. Until now though the markets didn't believe the Treasury Secretary, and they won't probably believe Mr. Bush either.

"We have a dollar that’s adjusting, and I am for a strong dollar. One reason I am for a strong dollar is because I want, you know, people to — I think it helps deal with inflation"

If someone had cast a look recently over the Dollar Index, it sits now at 72 points, which is 28% off from '73 value, when the US gave up on the Gold Peg.

US Dollar Index Forex

What happened to "Low Dollar helps exports" promoted by Mr. Bernanke? Maybe they don't believe that one either.

In the mean time, Fed Funds Future sees a 50 or 75 points rate cut, sending the Dollar a little lower.

Soon we will have a test on the 70 area on the Dollar Index, with the Fed Funds Target at 1%. What story are we going to hear then?

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Fundies and Trading
There is a constant question from some traders as to why anybody would ever need to consider the ‘F’ word when trading. Fundamentals: what is so damaging at looking at both Technical charts and having a Fundamental filter to gauge how many Lots to put on? Why is it that accepting that Technicals give us price points to trade, but Fundamentals determine the direction that we travel is so difficult for some traders to accept? Without a Fundamental Filter very few pure Technical traders would have seen this Dollar move coming today.

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