The dollar will stay at around the $1.40 mark against the euro for some time as both currencies face downward pressure and the euro is resistant to bearish news, Dennis Gartman, hedge fund manager and author of The Gartman Letter, told CNBC Wednesday.
“The dollar seems to be happy at about $1.40 versus the euro and I think it is going to stay stable for quite some period of time,” Gartman said.
“There are so many problems incumbent on Europe that should put downward pressure on the euro, but also so many problems going on with the dollar that will put pressure on it, that I think they will stay stable,” he added.
The euro has a 55-day moving average of about $1.44 against the dollar at the moment. This relative strength has come despite the lack of agreement over the terms of a new bailout for Greece, and troubles elsewhere in the euro zone. The dollar is also under pressure from growing worries about US debt.
Federal Reserve Chairman Ben Bernanke warned Tuesday that if the US’s $14.3 trillion debt ceiling is not raised, a potentially disastrous loss of confidence in its creditworthiness could result. The government could start defaulting on its obligations if Congress does not increase the limit by August 2.
“The oldest rule that traders learn is that if something isn’t going down on bearish news, it is not going to go down,” Gartman said. “The euro didn’t go down on the downgrading of Greece debt, and that may mean we are going to stay right here.”
Both the euro and the dollar were boosted against safe havens the yen and the Swiss franc Wednesday after better-than-expected US retail sales data.
Wall Street posted its biggest gains in nearly two months on Tuesday after data showed that US retail sales fell by 0.2 percent in May, less than the expected 0.4 per cent fall.
Greece now has the lowest credit rating of any country in the world according to Standard & Poor's, which downgraded it on Monday.
“The ratings agencies took a black eye during the credit crisis so now they’re trying to get ahead of the news,” Gartman said. “The problem is that everyone knows about the news already, even the guys I play golf with who don’t know what’s going on in the world.”