The S&P/Case-Shiller Home Price Indices (HPI) reported a yearly change of -7.3% through October 2009. The monthly change, from September 2009 to October 2009, was flat at 0.0%. This market seemed to spin this into a positive, that housing prices are stabilizing.
The Conference Board (CB) Consumer Confidence figure was also released today, coming in at 52.9, just under expectations of 53.0. This marks the 2nd consecutive monthly rise in consumer confidence, though 3 months have been higher in 2009.
Today’s Treasury auction was better than expected, as demand for US debt remained high, especially the 5 year notes.
It makes sense that strong demand for US debt would increase the strength of the dollar. However, the market seems to be failing to realize the long term irresponsibility of the US’s borrowing. The US national debt has grown to over $12 trillion and the money is often used to consume rather than to produce. It is likely that the US will face more difficulties down the road paying off this debt, and may increase its monetization of the debt, which would weaken the US dollar further. So while the short term reaction is dollar strength, long term the ever expanding US national debt is likely to weaken the dollar.
Therefore, we continue to be bearish on the dollar. Look for these types of moments where the market strengthens the US dollar against stronger currencies, like the Australian dollar or Euro. Then, using AUD/USD as an example, look for opportunities to buy AUD/USD at a low price with strong support.
