I am back from my two month summer hiatus and I am more charged up than ever. Not because my beliefs are coming to fruition, but because the market is lending itself to such great opportunity right now. It is becoming increasingly easier to pick a winner in the Forex market – and when I mean easier I mean, short the US Dollar.

The Australian Dollar has been stellar in the past few months, and I have made no secret of my love for this currency. But, it is the US Dollar that has now caught my eye as the most lucrative trade, whichever currency it is paired up with, if you happen to be on the short side of things you have been doing quite well. Even against the pathetic Sterling the Dollar has been losing and I do not foresee this changing anytime soon.

One reason for this is the new development out of the United Nations, which openly called for a “new World Reserve” currency system – a new world order of things if you will. Now, keep in mind the UN has not been a fan of the US for some time now, despite the US paying most of its bills and being a staunch supporter of most of its social programs such as UNESCO and UNICEF. The world hates the top dog and if it were not for the veto power the US holds, I know there would be much more open criticism and dare I say, sanctions, against the world’s largest economy.

But the announcement from the UN comes on the heels of President Obama deciding that he will be the first sitting US president to chair the all powerful (I am being cynical here) Security Council. In a gesture meant to help bridge the gap between the impression the world has on the “stuck-up” and “maverick” United States, the President wants to approach the world stage with an open hand and show that we can all work together. Now, I will bet that this move has less to do with nuclear proliferation than it does the UN’s call yesterday – but I am not qualified to make such an accusation.

In the Forex marketplace we have seen the Dollar start its collapse. China, which had kept mum on its concerns over the Dollar for a few months, is also back into the picture. Speculation is that their $2 Trillion Dollars in USD reserves is being liquidated quietly and relocated to gold – which would explain the sudden increase in the shiny commodity. Aside from this, they are also becoming vocal once more, sending a top Communist party official to the media using words like “dismayed” to describe how they feel about the US’s free use of the Treasury printing presses to cover their bills.

Cheng Siwei, a top leader in China told the UK’s Daily Telegraph that Beijing was being compelled to redesign its foreign currency reserve policy. No doubt this is having a grave affect on the USD and it is the reason why I believe that no matter what the data shows about a recovery, the USD is destined for a downward trend in the coming few months. China does not do things half assed, and you can bet that this is not the last we will hear about discontent from the US’s largest lender. The season is ripe for a controversy – its September, and historically it has not been a good month for the USD – my bet is that this will be one of the worst on record. Sit back and short – you won’t be sorry you did.

A report came out today from an analyst at Cazenove Capital that said the pound could reach parity with the dollar. Ouch… If this happens, the British might flood to Iceland for stability. Seriously, though – the report stated that the pound was likely to fall to between $1.20 and $1.25 USD which, in itself will cause severe pain in the UK. It is too bad the American Economy is doing so bad as well, or the US citizens would be flooding to England for vacation.

What brought the UK to this point is the same thing that can possibly bring the US down as well – government intervention in the dealings of private business. It has been a theme of mine here underline the need for companies to fail, it is the way of the free market world and any intervention can and will have dire effects. Capitalism does not always mean that people win, in fact, capitalism is based on the idea that you need to have losers in order to build growth. We are not all equal, and we should not be. Perhaps President Obama can learn a lesson from what is happening in England before he agrees to the US Congressional proposal for a new stimulus package – one that is filled with so much pork in it you have to wonder who is being stimulated.

I read an article not too long ago on RealClearMarkets.com by a man named John Tamny who has now become my new hero – in the article on government intervention into the banking sector, he said what I have been saying for a long time , that failure is the fertile ground for success. This is a fundamental principle of capitalism and needs to not be forgotten. When a company fails, another company takes its place – or another company is strengthened – it’s a cycle that needs to keep on moving and intervention through nationalization will only grind it to a halt as bureaucracy causes things to move at a slower pace than normal.

An interesting note to the Cazenove report, when it came out, the Pound was trading against the dollar toward its session lows of $1.393 – it bounced up and hit a session high of 1.4204 not too long after that and is currently trading at 1.4137. Sometimes we (both ordinary people and Forex people) need a little bit of bad news to motivate us towards a gain, I am sure this rally in the pound is short lived as it has more to do with the traders realizing that the US housing report which was stronger than everyone expected yesterday, was so because real estate is dirt cheap in America now.

One of fastest growing segments of the US economy now is foreclosure auctions – banks are so desperate to get the bad debt off their hands, they are fire-selling everything that has a minus sign next to it regardless of whether or not it is a smart idea. There was a report last night about a man in California who has purchased seven houses for less than a million dollars – a year ago that would have been unheard of – three years ago you could not even afford to buy one of them for a million. The US in trouble, they need to learn to not make the mistakes that Roosevelt made by pumping money into a system that needs failure in order to succeed. And more important, they need to understand that the US economy has been in an expansion since President Reagan methodically took the US out of recession 25 years ago – a living thing needs to breath, expand and contract – they need to allow the contraction.

As I write this 75,000 jobs have been wiped by Caterpillar, Home Depot, Sprint/Nextel and literally this second, Dow-Corning which added another 3500. The US unemployment rate for May hit 9.4% and based on these figures, it is getting worse. With more people losing their jobs, there is a good chance they will stop spending in stores as they save their cash to make their bare necessities. It would serve the US well to take the 850 Billion dollars and give it to its citizens so that they can spend, so that money floats back into the system. Stop handing money to corporations and stop the appropriation of funds into pet political projects that will only serve to help the politicians raise more money come election time. If you are going to spend it, give it to the people that not only need it, but the people who will be paying for it for years to come – the citizens.

The US Dollar fell against the Euro and Sterling yesterday as Forex traders and investors gained confidence which translated into an increased risk appetite as the US government moved to shore up the economy. Yesterday, the Bank of Japan left interest rates at near zero announcing that they will use all tools at their disposal to continue fighting the economic downturn – with near zero interest rates they have no tools left. The US Federal Reserve declared yesterday that the economy has indeed worsened and it could get worse still, although the bright spot is it will do so at a slower pace – that’s refreshing to all of us, not.

In what was seen by the Forex trading community as a signal of strength in action, the Fed said that they will continue to fight the economic woes at the source by supporting the functions of the financial industry by purchasing large quantities of mortgage backed securities, CDO’s and agency debt. This specific announcement pleased those trading and investing in the Forex markets that fled the perceived safety net of the greenback for some risk and potentially greater reward. At least this is what the Fed wants you to believe. Oddly enough they made no mention if the Russian, Brazilian, Indian and China – AKA BRIC – declaration that the Dollar be replaced as a safe haven

There is a big concern in the Forex market that the US government’s moves to “stimulate” their economy will have a negative impact on the greenback. By pumping close to a Trillion dollars of money into the economy, the Fed is in effect raising its fiscal deficit to over two trillion dollars which will make it necessary for the US to increase borrowing and the printing of money which will dilute the value of the currency. While investors see the US as a safe-haven, a passage of the proposed stimulus package, the second one in four months, might turn investors away from the currency and weaken the perceived strength of the USD in world markets.

In another alarming sign that things are getting worse before they get better, the International Monetary fund announced yesterday that they will run out of money if they had to address all the claims coming in for its help. This is the same IMF that Russia and China are interested in buying bonds from in order to dilute their Dollar holdings. The IMF cut its global growth forecast to .5% revised down from 2.2%. With so many countries in financial trouble and the main body responsible for helping economically challenged countries also experiencing difficulties – the outlook is bleak for the near future.