[quote=4plexowner]
Eugene – see that action on the right side of the chart? We call that a “downtrend” – it means that prices are declining – in this case, it is the US dollar and it has dropped from 0.90 to 0.78 in the last 5 months – more significantly, it fell through 0.78 this week – 0.78 has been considered a ‘line in the sand’ – next support is around the 0.76 level
what would signs of an upcoming collapse look like?[/quote]
There’s a funny thing about financial markets. It’s so well known that mutual funds put it in their disclaimer statements: “Past performance does not guarantee future results.”
In other words, given the fact that the US dollar dropped from 0.90 to 0.78 in the last 5 months, it may be as likely to get to 0.66 by March as it is to get back to 0.90.
I recall Mish looking at an uptrend in the dollar earlier in the year and forecasting parity with the euro. And, for a time, he was right. And then he wasn’t. And euro is back at 1.45 today.
Good news is, we have futures markets, which are supposed to reflect future exchange rates, to the best of available knowledge.
EURO FX (P) Daily Futures – Thursday, 10 September
Cash (ECY00) 1.45820
September ’09 (ECU09) 1.45830
December ’09 (ECZ09) 1.45830
March ’10 (ECH10) 1.45820
June ’10 (ECM10) 1.45840
But then, if you think about that, it’s almost obvious – futures can’t deviate much from the current exchange rate, because if they did, one could make a few obvious manipulations involving borrowing and forex conversions, resulting in guaranteed income.
What that means, then, is that you can’t have an “upcoming” foreseeable currency crisis – as soon as it becomes foreseeable, forex and futures traders make it happen RIGHT NOW.
Maybe there are some indications that things will happen to the dollar, maybe it will be less important as a reserve currency a few years from now. But these indications are fully priced into the market by now. Maybe that’s where your downtrend came from.
