US Dollar Is Movin On Up

As we mentioned in a post on September 1st, the US dollar appears to be making its upward move. While at the time, we were only 60% sure of this move, it now appears to be baked into the currency and economic cake. If the dollar can break through the 77.8 50 day EMA and stay above it for a few days, we can be assured of this major reversal.

The target we are setting for this move of the dollar is at least 82 on the dollar index and possibly as high as 87.

Implications for this move are:

1) An overdue drop in crude prices down to the $50 range or lower

2) A pull back in gold prices to $960 or so. It will be interesting to see if Chinese buying has established a "floor" for gold prices.

3) A major drop in overbought stock markets such as the Dow, S & P 500 and TSX.

4) Treasuries gain (dropping their yields)

All of these items fit the deflationary hypothesis that some have been advocating lately. No inflation in sight here (although that may change much later).