This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

How the Dollar Could Rally

There's a Wall Street maxim that the national news magazines often make great contrarian indicators. With a cover story titled "The Incredible Shrinking Dollar," the latest issue of Newsweek, therefore, provides an opportunity to ask a question that very few observers seem willing to contemplate: What could cause the dollar to rally?

Dispensing with the preliminaries, I'm aware of the dollar's long-term structural deficiencies, namely the current account and federal budget deficits. With the so-called twins seemingly getting bigger by the day, and more foreign central banks using the dreaded D-word ("diversification"), it is very hard -- if not impossible -- to make a long-term bullish case for the greenback. Indeed, we may be witnessing the early stages of the dollar losing its standing as the world's reserve currency.

But bear markets are often interrupted by ferocious rallies -- nine of the Nasdaq Composite's 10 biggest percentage gains occurred during its 2000-02 swoon -- so it's wise to consider some potential catalysts for a significant intermediate-term advance in the beleaguered buck.

"If there's going to be real strengthening of the dollar, it has to come from money leaving Europe" and the euro, says Dennis Gartman, publisher of The Gartman Letter.

The trigger for such a move may have arrived Friday when an opinion poll showed, for the first time, a majority of French citizens oppose the European Union constitution, on which they'll vote May 29. In recent trading, the euro was at $1.3282, vs. $1.3374 late Thursday.

The Dutch vote on the constitution on May 26 and a rise in opposition sentiment in either country could be "the next tipping point" for dollar/euro trading, Gartman says. "What happens if the Dutch or French vote down the constitution? Suddenly the EU ceases? It will be shocking to Europe."
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
GM $29.05 1.60%
AAPL $112.59 -0.29%
FB $90.70 1.10%
GOOG $627.48 -1.60%
TSLA $248.04 2.10%

Markets

Chart of I:DJI
DOW 16,610.10 -44.67 -0.27%
S&P 500 1,984.11 -3.55 -0.18%
NASDAQ 4,817.0870 +4.3790 0.09%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs