Pretty sneaky for the world to frag the dollar the other day, when U.S. markets would surely have preferred to loll about in a traditional Friday-after-Thanksgiving stupor. So what's next for the greenback? A Christmas-Eve gang-bang, perhaps? In any event, we should always pay close attention when the dollar is getting savaged, since the sums involved are probably sufficient on a bad day to topple the global financial system from its already wobbly pins.. Was there any evidence of such jeopardy on Friday? Not that I could discern, at least not from a coldly mechanical reading of the charts. Below is a long-term picture of the Dollar Index, which settled on Friday at 83.38. Although this slightly breached a 'midpoint' Hidden Pivot at 83.52, implying at least somewhat lower prices, the worst-case scenario over the next four to six weeks would call for a drop to no lower than 79.74. Thereafter, we would probably be looking for a strong rebound. Now, you don't have to be a technical analyst to see that holding above 80 is absolutely crucial to perceptions of the dollar's health. It has crossed that threshold only once, in 1992, and not by much. If the support were to be decisively breached any time soon you could kiss the U.S. economy goodbye, since it would create an impossible dilemma for the Fed. At that point, the central bank would be forced to defend the dollar with sharply higher interest rates, since foreigners might otherwise be inclined to take their surplus capital elsewhere. And what a financial catastrophe that would be! Realize that the current account deficit has been growing recently at an annualized rate of $874 billion, requiring external financing of more than $3 billion per day. Deflation Juggernaut But the problem with raising rates is that
LATEST TRADES
