Though I am bullish longer-term on the dollar, as you can see here, I think we could actually see a strong drop in the near term.
Take a look at the Commitment of Traders for the dollar index above. Notice that commercial traders have rapidly grown a huge net short position as the dollar has rallied. If you look back to the previous time there was a similar net short position, there was a large 5-pt drop in a short period.
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Maybe. The commercial traders are probably betting the Fed will debase the dollar to keep equities pumped.
But... Timmah needs to sell some bonds and there's a problem: foreigners don't want our debt, and there's a dollar shortage.
When push comes to shove, they will crash the equity market to get save the bond market, and if the commercial traders read this wrong... Sayonara, suckas!
http://thetaildoesnotwagthedog.blogspot.com/2009/12/gee-i-wonder-where-theyre-going-to-find.html
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