Dollar Comeback?

Interesting SmartMoney article about the buck.  {Excerpt with my highlights}:

 

One of the favorite bets in the market right now is short the U.S. dollar. But could the greenback be in for a turn higher?  The case against the dollar is strong and widely held. Last week, the Commodity Futures Trading Commission's weekly report of currency positions showed that almost all speculators were short the dollar and long the yen, euro, pound, Swiss franc and other currencies.......

......At the heart of the negative greenback story is the shifting short-term interest-rate environment. The U.S. is maintaining a super-easy monetary policy which includes record, rock-bottom short-term rates with a quantitative easing kicker. At the same time, other central banks are starting to make moves to raise short-term rates and exit emergency measures started in the wake of the financial crisis.

Currency speculators tend to favor money that pays better returns, and right now holding the dollar pays you nothing, and will pay less than that if it continues to drift lower. The European Central Bank, citing rising price pressures, has all but promised that it will raise rates at its next meeting April 7. The Bank of England, facing inflation more than double its 2% target, may raise rates as soon as May. At the same time, the Federal Reserve isn't expected to start raising rates until the end of the year and maybe not until 2012.

Compared with so-called commodity currencies, the dollar is faring even worse. Boosted by gains in oil, metals and agricultural commodities, the Canadian dollar and the Australian dollar have surged against the greenback.

Against all those headwinds, how might the dollar start to make a comeback? Here are three things to watch.

The Federal Reserve and QE2. The Fed's QE2 bond-purchasing program is scheduled to end in June. Recent extremely weak housing market data has prompted some debate about a QE3......But a number of Federal Reserve officials have started to sound a more hawkish tone about any possible QE3......If Fed officials keep making such noises, it could start to turn sentiment concerning the dollar.

The euro-zone mess. It's remarkable that the euro has strengthened given all that's happening in the zone. Ireland and Greece are in the rescue ward, and their salvation hardly looks secure. Now Portugal, having failed to pass an austerity budget, looks likely to join them.....Portugal will need funding help in a matter of days, but the Eurocrats, as per usual during this slow-motion sovereign crisis, continue to dither.....and the European ATM – Germany – is facing its own political upheaval, with the ruling party losing recent elections.....

....U.S. economic data. The ace card for dollar bears is the Federal Reserve's easy monetary policy. This will get tougher to maintain if the U.S. economy continues to show strength, something St. Louis Fed President Bullard alluded to in talking about curtailing QE2.....The dollar can't fall forever. And maybe the Fed is starting to espy inflation even as it talks it down. "What might have raised some eyebrows were signs that inflation expectations from the well-regarded University of Michigan survey, are on the rise," said Jim O'Neill, chairman of Goldman Sachs Asset Management, in a research note this week. "This has to be watched carefully, especially as the more reliable coincident and lead sector real economy data remains more buoyant. I still think the dollar could snap back easily in the event of the Fed shifting its stance against both the euro and yen."

Link:  Why The Dollar May Make A Comeback.

My comment:  All this may be true but the charts of the Dollar still look like a bull market death trap.