August 10, 2009 – We have been holding goldgrams as our Core Currency Position, since March 23, 2001.
On May 4th traders sold the US dollar by shorting the Dollar Index at 83.97. Stop out this trade if the Dollar Index closes above 80.80. The Dollar Index broke below 78.40, the low it made in June and the key level I said to watch in the last letter. The ratio slid all the way to 77.52 on August 5th, but then began what is so far a 2-day rally. The Dollar Index closed the week at 78.98, back above the June low, which I did not want to see happen.
A bounce was not unusual because the dollar had become oversold having slid so quickly in a short period of time. And bear market rallies in the dollar can often be violent, just like this current one. Bouncing as high as it did does not change the long-term trend, but it does suggest that the dollar may have a respite for a week or two before resuming its downtrend.