Brazil’s real sky rocketed today amid the U.S. Federal Reserve decision to maintain most of the stimulus that has buoyed emerging-market assets, closing at around $2,20.
The Dollar broke a major support and gold surged. The Chart below (hat tip to Stockcharts’ Arthur Hill) shows “the US Dollar Fund (UUP) taking a monster hit this week and breaking support from the July-August lows. The August 2011 trend line also marks support in this area. UUP appeared to get a bounce off support in late August, but this bounce failed miserably as the Dollar fell sharply the last two weeks. Quantitative easing dilutes the Dollar and keeps downward pressure on interest rates, both of which are Dollar bearish.”
Bottom Line: The Fed is simply postponing the Emerging Markets’ doomsday. Today was a great day for stock market bulls, but a terrible day for American Purchasing Power ($USD). Our investment idea of the day is: sell as many BRLs possible because this seems like a dollar bottom – the long-term (5-year) trend is still up.