My short bias on the dollar is based on the debt that the US government is taking on. This will eventually lead to inflation, which will devalue the dollar. Recently the dollar has been rising because all countries are taking on debt. It is also seen as a safety play during a time a crisis. Both of these things though should not last long. The United States is going to take on a lot more debt than any other country, and once the crisis subsides investors will sell their dollars for riskier assets.
To back up the inflation argument look at a chart of M2. The black line is overall money supply, while the red line is month over month change in M2. This chart is through February 2009, and does not include much of the spending from the stimulus package.
If President Obama continues to push through more of his agenda, such as nationalizing health care, money supply will continue to spiral out of control
Below is a daily chart of the Dollar index. It recently broke through $82 which was a prior high.
Looking out at the weekly time frame though, the Dollar is approaching resistance around $92.
Backing out to the monthly time frame reveals the dollar is still in a multi year downtrend.
I'm looking to short the dollar via the inverse ETF UDN. It has a level of support around $24. I'll place a stop below $24 and keep an eye on the dollar index to monitor it's progress.
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