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Crucial Update :US Dollar Index ,Euro ,Yen ,INR ,GBP ,AUD ,SPX 500 ,Nasdaq Composite ,DJIA ,Shanghai Composite -Anirudh Sethi

The US dollar fell against most of the major currencies over the past week. The yen and the Swiss franc were the exceptions.  The technical correction, we anticipated last week, may have some more room to run.  However, we do view it as a counter-trend move and expect the data to show the US economy picked up some momentum going into the end of Q1.  If recession fears are exaggerated so too are expectations that the Federal Reserve will cut rates.  An adjustment of such expectations can be the fuel of the next leg up for the dollar.
Dollar Index:  The Dollar Index tried one more time to push through the 97.50 area at the start of last week and gave up and retreated to about 96.75, where the 50-day moving average is found, ahead of the weekend.  It traded below its 20-day moving average (~96.90) for the first time this month but managed to close just above it.  The move that we think is being corrected began ironically with the low on March 20 when the FOMC last met and the Dollar Index posted an outside down day.  But there was no follow-through, and before the past week, it had risen in the nine of the 12 sessions after the FOMC meeting.  It had retraced 38.2% of the move by the middle of last week (~96.85) but before the weekend, made a push lower toward the 50% retracement (~96.65).  The 61.8% retracement is found about 20 ticks lower.  The five-day moving average (~97.02) is poised to fall below the 20-day moving average (~96.90), which may be a useful proxy for some models.  The technical indicators we look at also suggest scope for more declines.  Waiting for some sign of a reversal may be preferable to trying to catch the falling knife. That said, on a risk-reward basis dip below 96.50 would look attractive.
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US Dollar Super Cycle Revisited

In the big picture, we argue that the dollar’s appreciation is part of the third significant dollar rally since the end of Bretton Woods. The first was the Reagan-Volcker dollar rally, spurred by a policy mix of tight monetary and loose fiscal policies. The rally ended with G7 intervention to knock it down in September 1985. After a ten-year bear market, a second dollar rally took place. It can be linked to the tech bubble and the shift to a strong dollar policy.
The carving out of the internet drew capital into the US and induced Americans to keep their savings here. It may or may not have been sufficient to fuel a multi-year dollar advance. Rubin replaced Bentsen at the helm of Treasury and nearly immediately articulated a shift in policy. No longer would the US use the dollar as a trade weapon as previous administrations and officials did. The US would not engineer a weaker dollar to reduce its debt burden. This is the essence of the strong dollar policy. The US first unilaterally disarmed and then succeeded in convincing the G7 and G20 that de-weaponizing the foreign exchange market was the best practice.
However old habits die hard, during the Clinton dollar rally, the euro was born and immediately depreciated. It fell from around $1.19 to below $0.85. They cried, “Quit picking on our euro,” though the market was really accumulating US assets. In October 2000, after Summers replaced Rubin and at the request of Europe, there was coordinated intervention to buy the euro and sell the dollar. The official action and the popping of the tech bubble marked the end of the Clinton dollar rally.
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