USD OUTLOOK: Bullish
January 25, 2010
by Gold Coast Asset Management Inc.
Published by The McKinney Trading Channel
http://mckinneytrading.blogspot.com

The US Dollar has hit five month highs against the Euro, a one month high against the Canadian Dollar, and multi-week highs against both the Australian and New Zealand dollar.

We anticipate a pull-back in the USD over the next week or so, however we currently remain fundamentally bullish on the USD due to global risk aversion. The following points support our stance:

- China has announced that it intends to cool down its economic growth
- U.S. President Obama is aggressively acting on regulating and de-leveraging risky speculative trading among the U.S.'s largest banks.
- The Euro zone is still facing a debt-crisis in Greece's economy, and potentially that of Spain's.
- Global unemployment is not expected to improve through out 2010

With financial risks and aggressive regulatory reform continuing to loom across the globe, institutional traders and banks may have begun to quickly lock in any profits they realized in 2009. In addition, demand for stocks and commodities appears to be on a decline. And demand for U.S. Bonds could increase on the back of any further signs that there is still too much risk in the global economy.

So, investors who were hoping and praying for a quick global economic recovery in 2009 could be in for a sobering surprise in 2010. Again, our stance is that risk aversion is in full swing and fundamental support for the USD is getting stronger.

The current state of the USD could be overbought and a correction could be imminent. I believe that any correction in the USD should be viewed by investors as an opportunity to get long the USD at a better exchange rate, as we anticipate risk aversion to increase into the US Dollar the rest of the year.

Sincerely,

Gold Coast Asset Management Inc.

The McKinney Trading Channel
http://mckinneytrading.blogspot.com

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