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Posted by on Mar 25, 2015 in Market Insight

Historic Reversal for the US Dollar?

Dennis Gartman has been directly involved in the capital markets since 1974 and has been publishing his daily commentary, The Gartman Letter, since 1987. Mr. Gartman is a strategic partner with the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN) and lends his institutional insight to educate advisors and investors about trading gold in different currency terms.

The US dollar has fallen very sharply since last Friday and although we are certain that there have been days in the course of the past twenty eight years since we began producing TGL on a full time basis that the dollar has fallen more sharply and more broadly, we cannot remember it having done so. The dollar has fallen by more than 1%, having fallen by that much or more relative to the EUR, to the Swiss franc, to the British Pound Sterling, to the Canada/Australian and New Zealand dollars, to the Mexican peso; to the Brazilian real and even to the Russian ruble.

Note then the chart of the US dollar vs the British Pound Sterling included here and note the massive “reversal” to the upside forged mid-week last week as Sterling ran to new multi-month lows vs. the dollar and then soared, closing higher upon the day and closing above the previous day’s highs… a text-book reversal. As always, we pay heed to such things and heed should be paid here. Too, the dollar “reversed” relative to other currencies, notably the Canadian dollar on the daily charts, and perhaps most importantly of all, it “reversed” to the downside in weekly terms relative to the EUR. Finally, paying heed to the chart on this page, the dollar “reversed” to the downside relative to gold, or if one prefers to think of it in gold’s own terms, gold “reversed” to the upside in weekly terms vs. the US dollar.

Clearly something has changed in the forex market, for this number of daily and weekly “reversals’ is, if not unprecedented, it is astonishingly unusual and so we draw attention to all of these changes and have no choice but to change our own thesis on the dollar accordingly, moving from being overtly bullish of it to being at least neutral and perhaps having no choice but to turn bearish sooner rather than later. The massive one-sidedness… of the participation on the short side relative to the EUR had reached epidemic proportions. Indeed one or two major magazines that we have always looked upon as bellwethers in the market headlined stories about the demise of the EUR and other such commentaries. Such ubiquity has always signaled major turning points, and if not to the day, perhaps to the week.