Is the Dollar ready to rally?

US Dollar chart and sentiment extremes bullish and bearish, (source: tradersnarrative.com).

10 October 2009, everyone thinks the US Dollar will continu to fall in nexts weeks or months. It’s a global perception. Even some of the world’s most renowned economists, including Nobel economist like Joe Stiglitz or Paul Krugman, just predict the end of the reign of the dollar. Is the World lossing faith in the Us Dollar?

The Nobel Prize in economics, Joe Stiglitz recommended not to keep savings in dollars.

“The United States must brace itself for the dollar to be usurped as the world’s reserve currency as American dominance wanes in the wake of the financial crisis”, the World Bank president, Robert Zoellick, warned yesterday.

Such is the global negative sentiment about the weakness of the dollar as the advisor polls of MBH Commodities, 96% of investors now think the Dollar will continue falling or rather plunging. Also the feeling of currencies investors (DSI source) is that only 5% think the dollar will rise.

Although I also think that in the medium to long term the dollar is likely to continue experiencing a structural weakness, I think we might be a few days or weeks to see a very strong dollar rally, be careful.

This situation reminds me the first week of March 2009, near the lows in stock markets. It was just the beginning of one of the biggest bull market in decades. I think that the dollar is just prepared for a big rally.

And remember: “One man can make mistakes, but the crowd is always wrong.”

PD: Read this funny and interesting post in rithholtz.com, about present US Dollar bearish sentiment extreme.