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Long-Term Trend Signals Dollar Strength: Pro Traders

If you’re betting on weak dollar trades, you might want to re-think your thesis.

John Taylor, chairman and founder of the currency hedge fund FX Concepts tells us although he’d short the dollar for about the next month – after that, he expects the dollar to get stronger.

Sure lots of people are making calls about the dollar but when Taylor talks, we listen. He’s among the most experienced currency pros working today with more than 40 years in the foreign exchange and fixed income markets.

And he tells us, although immediate catalysts may send the dollar lower – the long-term fundamental catalysts are bullish for the greenback.

“Nothing has really changed – Europe still looks weak, we’re worried about China and the US is looking relatively stronger,” says Taylor.

In fact, he thinks the new leadership at the ECB will be more willing to stimulate the economies of the EU, and says “because of the change at the ECB, I think the euro will finally go down. If a recession in Europe is coming, the smartest thing the ECB can do is drive the currency down.”

He goes on to say, "I think the euro trades to 115 or 118 (against the dollar) by May."

Trader Brian Kelly agrees that in the long-term, the dollar’s likely move is higher.

“If the world takes a turn for the worse, then the dollar is attractive as a safe haven and if the US economy gets better, the dollar is attractive on economic strength.”

And that begs the question, how should you position?

Taylor reminds, “The equity market doesn’t typically go higher with the strong dollar.” And he cautions that the currency headwinds could start to drag down earnings of the big multi-nationals.

Brian Kelly suggests playing the thesis long dollar but not against the euro -- instead against the yen. “And you can do that by shorting the FXY – or buy long dated puts,” he says.



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Trader disclosure: On Mar 15, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Kelly is long SMH; Kelly is long MXN; Kelly is short JPY; Kelly is short Aussie dollar; New Zealand dollar; Grasso is long ASTM; Grasso is long AVAV; Grasso is long BA; Grasso is long D; Grasso is long MHY; Grasso is long NUAN; Grasso is long MO; Grasso is long PFE; Grasso is long PRST; Grasso is long S; Grasso is long XLU; Link is long STI; Link is long JPM; Link is long USB; Link is long TJX; Cortes is long Treasuries; Cortes is long PPH; Cortes is long DEO; Cortes is long SO; Cortes is long SBUX; Cortes is short USD vs. JPY; Cortes is short AAPL

For Brian Modoff
(CSCO) Is an Investment Banking client of DBSI. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year. This company has been a client of Deutsche Bank Securities Inc. within the past year, during which time it received non-investment banking securities-related services.

For Dana Telsey
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