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Apart From The Crowd

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IS THIS JUST A FALSE BOTTOM INTHE U.S. DOLLAR?

Whether The Dollar Will Rally and End The Rally in Risk or Continue to Decline

It is well known that the U.S Dollar (“USD”), the world’s reserve currency has been declining of late.Generally, the recent discussion surrounding the USD has been focused on the apparent reality that as theUSD declines, equities, and any other asset denominated in the USD, such as commodities, will rise.This concept has been reinserted into the collective psyche of investors due to the large snap-back rallyexperienced in the equity and commodity markets since the meltdown of 2008 came to an end – though perhaps only temporarily. Of course before the collapse, the USD made an all time low near 70.00 asmeasured by the Dollar Index (“DXY”), right along with the spike top in commodities in general in the

Annotated Charts and Commentary on The Financial Markets By David L. Singer | November 23, 2009 |

Volume 1 – Issue

Apart From The Crowd

|davidlsinger@gmail.com| 516.830.1786

summer of 2008. As the Lehman collapse and other nerve shattering events unfolded, the USD rallied, asdeflation kicked in and a flight to quality ensued. Commodities and equities both fell off a cliff.As the bounce off the bottom has gained strength, calls for the demise of the USD have echoedthroughout the investment world. Of course, the massive fiscal deficit, bailouts, and expansion of the Fed balance sheet have lead many to assume that the only way to get out from under the massive debt will be todevalue the currency and the only question is will the decline be orderly? After all it seems true that it is inthe politicians best interest to devalue the currency and inflate the debt away. Even with this negativesentiment, the fact is that during its recent decline, the USD has not reached the low levels that it reached inthe summer of 2008.With the calls for the demise of the USD growing louder, another voice, though of less magnifiedquality has been calling for the strengthening of the USD. This is largely based on the calls for continueddeflation, a drop in equities, and a flight to the USD’s safety, amid the next phase of the ongoing implosionof the credit bubble. This investment thesis is exemplified by the recent writings and comments by BobPrechter of Elliott Wave International.So? Which is it? These are diametrically opposed outlooks. Only time will tell.In the meantime I have looked at the recent performance of the USD according to the DXY to see what thechances are of the USD continuing its decline to challenge the 2008 lows and perhaps even break them.There was a lot of talk recently focusing on the fact that the USD made new lows for the year on the DXY.The DXY is calculated based on the performance of the dollar as measured against a basket of currencies.

Apart From The Crowd

|davidlsinger@gmail.com| 516.830.1786

However, in recent days the USD has rallied somewhat and those who think a decline in equities is cominghave become emboldened by a little bit of strength in the USD. Personally I have thought that we would geta USD rally for some time now, largely based on the overwhelmingly negative sentiment coupled with thefact that we are still well above the 2008 lows.In order to examine just what the USD has been doing lately as compared to other world currencies, Ilooked at some shorter-term USD charts. What I noticed was that he USD did not make new yearly lows as priced as compared to a number of individual currencies, whereas the DXY has.Japanese YenSwiss Franc