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Chart Presentation: The DollarInter-Market
Relationships Analysis July 3 (Bloomberg) - The euro fell the most against the dollar in more than two months after European Central Bank President Jean- Claude Trichet signaled that he may not increase interest rates again. Our view was that the euro would reach a decision point and then reverse to the down side. The initial reaction by the euro last week following the ECB's rate hike may not have confirmed that we were correct but it did show that our view was at least not in error for the time being. Below we have included a comparative chart of the U.S. Dollar Index (DXY) and the Baltic Freight (Dry) Index.
In past issues we have shown that major peaks for ocean freight rates have tended to go with equally major bottoms for the dollar with the last similar event taking place in 1995. The argument has been that the dollar would work through its cycle bottom as the BFI made its final peak. The chart suggests the potential for a shift back towards a rising dollar beginning back in May and June. Below we have included a comparison between biotech company Amgen (AMGN) and the U.S. Dollar Index (DXY) futures.
On many occasions we have shown AMGN along with the dollar or AMGN relative to something like gasoline futures. The argument was that AMGN has been trending inversely to the energy trend and with the basic trend for the dollar. The point is that the dollar has been in a negative trend for almost exactly 7 years with the closing peak registered on July 5th of 2001. In the mean time the CRB Index has risen by more than 2 1/2 times. To get to a bottom for the dollar we needed to see some sort of peak in ocean freight rates and a bottom for stocks such as AMGN. The charts on this page make a somewhat tentative case that a trend back towards a sustainably stronger dollar has already begun although quite clearly the DXY will have to rise well above its moving average lines to mark the turn. There are encouraging signs for the dollar which suggest downward pressure on the commodity theme but it is still much too early to mark this one as paid. Jul 7, 2008 All Rights Reserved, 2008. IMRA subscriptions are available at www.krk-imra.com 321gold Ltd |
