Wednesday, October 14, 2009

5 Ways to Protect Yourself or Profit From the U.S. Dollar Going Up or Down

The recent near-collapse of the U.S. Dollar has left many investors very nervous about their holdings in U.S. Dollars, and with good reason. The total present and future liabilities of the U.S are in excess of $100T, and the Fed prints trillions of dollars at will. The U.S. Dollar will soon not be worth the paper it is printed on.

Consider that as of 11AM today, in 2009:

- USD has fallen 28.19% versus the Australian dollar
- USD has fallen 17.88% versus the Canadian dollar
- USD has fallen 34.48% versus the Brazilian real
- USD has fallen 9.11% versus the USDX Index
- USD has fallen 20.16% versus gold

The Euro is on a similar boat and is only up 6% versus the USD.

Please take a look at this absolutely astonishing chart showing all foreign currency ETFs versus the USD (from our tracking site):

(click to enlarge please)


However, the current RSIs of these ETfs are stratospheric, indicating a very overbought condition. These countries are extremely worried (furious) that their currencies have appreciated so much versus the USD. Their exports are suffering tremendously since their currency is so expensive now.

Please take a look at the RSIs:

The average RSI-A is 64.0, and that includes the British Pound! Withut the it, the average RSI is 67.0

Will the Fed fix this situation, or will they continue to be happy letting the USD fall? Will gold continue to climb to new highs? We don't know. One way to profit from this situation is through the use of straddles. As long as the currencies move, eithe way, up or down, the starddles can become profitable. Below you will find straddles on 5 different instruments: 3 high-moving currencies, gold and the USDX.

The tables show the maximum moves required for profitability. They were computed with our StraddlesCalc tool.


For December 2009 and March 2010

Canadian dollar

For December 2009 and March 2010:

Australian dollar

For December 2009 and March 2010

Brazilian Real:

For January 2010 and April 2010


For December 2009 and March 2010

Note that Gold is the one that requires the highest move but is also the one with the highest options liquidity. Some of the above are not yet liquid enough, but that is the idea.

Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

These are not recomendations. Please do your own due dilligence. Options are extremely dangerous and can cause 100% loss.

Stumble Upon Toolbar

No comments:

Financial TV

Blog Archive

// adding Google analytics