Hans Parisis

Investors have a big probability of betting the wrong direction when they invest and trade on a further weakening of the dollar, in the medium term at least.

Today could be an important one for the markets as a whole. If the markets remain internally strong through today’s session, then we should see a new rally phase developing. But, if today shows little or no follow-through on yesterday’s rally, then yesterday will be no more than a one-day short-covering squeeze that ran the bears out of the market just before for the next leg down.

Yesterday’s Dollar Index indicated signs of bottoming. If that’s confirmed, the dollar could move up sharply from that bottom because the over-leveraged dollar bears will have to cover their positions.

Investors shouldn’t lose their head but should remain calm. There is currently no alternative to replace the dollar as the world reserve currency. That situation isn’t going to change as quickly as many seem to predict these days.

With G7 finance ministers coming together for the IMF and World Bank meetings in Istanbul, Turkey, Oct. 4-7, you can call it coincidence or not, but it now definitively looks like the verbal dollar support from the Europeans, Canadian, Japanese, and others has come back to life, once again.