A global move toward safety appears on the rise prompting a rush toward the US dollar. As the European recovery looks weaker than anticipated and stock markets begin to fall, we should see a substantial move to dollars. Our target is based on past performance of the US dollar index and on the increasing tensions that appear to be building as austerity takes hold.
Short term target for the US dollar range - 91 to 92.
Our longer term target for the US dollar is negative at present because we expect that the Federal Reserve will begin to expand its balance sheet again within months as the recovery falters.
We expect, given the present course of the Fed and Treasury, that the US will default on bonds sometime in the next two years or so. We do not have a target for the long term, as policy decisions made in the future will have a large impact on how the dollar performs.