Tuesday, April 5, 2011

U.S. Dollar Decline - April 2011 Update

U.S. Dollar weakness is a foremost concern of mine.  As such, I have extensively written about it.  I am very concerned that the actions being taken to “improve” our economic situation will dramatically weaken the Dollar.  Should the Dollar substantially decline from here, as I expect, the negative consequences will far outweigh any benefits.  The negative impact of a substantial Dollar decline can’t be overstated, in my opinion.

The following three charts illustrate various technical analysis aspects of the U.S. Dollar, as depicted by the U.S. Dollar Index.

First, a look at the monthly U.S. Dollar from 1983.  This clearly shows a long-term weakness, with the blue line showing technical support (until 2007):

(charts courtesy of StockCharts.com; annotations by the author)

(click on chart image to enlarge)


Next, another chart, this one focused on the daily U.S. Dollar since 2000 on a LOG scale.  The red line represents both a trendline as well as a relatively good visual “best-fit” line.  The gray dotted line is the 200-day M.A. (moving average).  As seen on this chart, the U.S. Dollar looks vulnerable to continuing its downward trend that has been interrupted since early 2008:


Lastly, a chart of the Dollar on a weekly LOG scale.  There are some clearly marked  channels here, with a large, prominent triangle featured.  Triangles are thought of as “continuation” patterns.  In this case, it would be a continuation of the Dollar downtrend since 2002:


I will be providing updates on this U.S. Dollar situation regularly as it deserves very close monitoring…


The Special Note summarizes my overall thoughts about our economic situation

SPX at 1332.87 as this post is written

1 comment:

  1. Why don't you forecast instead of just being vague and drawing colored lines? Give some numbers for exchange rates for 6 months, 1 year, 5 years say. Forecast yen/dollar, dollar/euro.