Nov. 3, 2010 -
PRLog -- Everywhere you look, it appears as though the US dollar is under siege. Many will recall how, when sterling fell from its giddy highs of $2.11 to $1.38, the overwhelming majority of commentators said that the once-Great British pound was due to collapse. Then, following the debt crisis in Europe had the same pundits declaring the imminence of the collapse of the euro; now, with barely-disguised rhetoric on the near-certainty of quantitative easing, part deux from the US Federal Reserve peppering the financial headlines on an almost daily basis, the death of the dollar has been predicted by economists and financial columnists.
Traders at “Omega-Trading”
are rather less certain of the outcome and are advising clients to refrain from entering the short-dollar, long equities/commodities trade. “It’s all a trifle overdone. The fact of the matter is that QE2, the nom du jour for the second round of quantitative easing, is largely already priced into the markets. Equities are already at levels that bear no correlation whatsoever with the situation on the ground in most advanced economies and when you see the ratio of short to long positions on the US dollar futures contract, you have to look at the possibility that the greenback could stage a recovery here that would shock a few speculators”
, said one “Omega-Trading”
analyst.
The analyst’s caution could be well justified given that, on the two most recent occasions that the dollar has been the subject of such overwhelming negativity, it has rallied strongly and sent both equities and commodities into sharp reversals.
Asked how investors should prepare themselves for a possible renaissance in the world’s reserve currency, an “Omega-Trading”
trader said the best course of action for those with the intestinal fortitude and mental discipline for short-term trading would be to simply exchange their currency for US dollars and hold for the short to medium term. Those brave enough to trade commodities like precious metals could, perhaps, take profits on part of their positions and buy the US dollar at its current levels. He cautioned, however, that “such is the depth and intensity of anti-dollar sentiment that it is entirely possible for it to fall through support levels and on to the lows of 2009 or 2008 so it is very much a risky contrarian position to take”.
But isn’t the selling of gold considered anathema at “Omega-Trading”
given their overtly bullish expectations for it in the years ahead?
“For those of our clients who have a mild risk tolerance, we’d always recommend that they simply hold on to their gold/silver because the long-term outlook hasn’t changed one iota but, for those who are a little more sophisticated, we think that the risk/reward ratio is more than attractive enough to warrant taking the chance”, the “Omega-Trading”
analyst concluded.
