How low can the USD go? We don’t know…….in fact we have no idea and perhaps more importantly do not want to have any preconceived ideas. What evidence would we look for that would suggest the bear trend of the USD has come to an end? Bear trends in currencies usually finish when there is a “universal give up” which would be depicted by a dramatic out-of-the-ordinary fall. So far the fall in the USD has been nothing spectacular, in fact it looks rather controlled and “orderly” with absolutely no hint of panic. Accordingly this behavior suggests that there is significant downside left for the Greenback!
Below are the charts of UDN (an ETF that moves inversely to the USD Index), and FXA (the Aussie dollar ETF that tracks the Aussie dollar future). Notice how close UDN is to breaking above “resistance”. A move above 27 on UDN would open up another 10% upside before the next serious resistance level appears. We think that we will see UDN at 30 over the coming weeks……and this would equate to the Aussie and Canadian dollars going to parity. We are betting on both!
