The Greenback is Broken

Barron's ^ | Aug. 3, 2009 | Michael Kahn

[givemELL]

THE U.S. DOLLAR INDEX, which tracks the dollar against other major currencies, fell below its important June low of 78.33 late last week. On Monday morning, it was trading at an 11-month low.

The bear trend from March continues with no meaningful support in sight.

Roughly two years ago, when the dollar was in its previous bear market run, the dollar index had moved under a multi-decade support level at 80 (see Chart 1).

[givemELL]

The article point out that the dollar index is influenced heavily by European currencies and is worth reading for that knowlege. Two pieces entered today not related to Barrons with discussion and TA and good graphs show a fearsome future that may be confirmed soon for the dollar:

http://www.oftwominds.com/blogaug09/KaPoom2CHS.htm

http://www.marketoracle.co.uk/Article12442.html (US dollar collapse starting)

[givemELL]

Dollar index dropped to 77.59 today. Not stated in the Barron’s piece.

[TruthHound]

[21twelve]

Not sure what the big deal is - we can just print more.

[the invisib1e hand]

The ratios are as follows:

EUR: 57.6, JPY 13.6, GBP11.9, CAD 9.1, SEK 4.2, CHF 3.6.

However, the term "proportion" is a bit misleading as the DX is calculated by geometric average of the component currencies. Nonetheless, you can that it's the Euro that pushes it around, mostly.

The futures contract is driven by two things: the ratios of the component currencies and their volatilities.

[Tunehead54]

4am bump! ;-)

[PugetSoundSoldier]

When you look at the DJIA in terms of GBP or EUR, it’s darn near flat... The “recovery” of the DJIA/S&P/NASDAQ is simply devaluing of the dollar rearing its head.

[givemELL]

Thanks.

[JasonC]

Mmm no. The move of the Dow from the lows is +40%, the move of the Euro over the same stretch is only +15%. Yes they are correlated, no the moves are not the same magnitude.

[PugetSoundSoldier]

Look since the first of the year; the DJIA is up in USD, down strongly in GBP, slightly down in EUR. The dip in USD was a lot worse than in EUR or GBP; the peaks are more extreme, too...

[wastoute]

Bernanke said he would know when to "pull money out of the system". Is it time, Ben? How does he do that?

Μολὼν λάβε

[the invisib1e hand]

dx is like my adopted son.

[the invisib1e hand]

I thought this sounded funny. It's right there in the article: the DX has not taken out its recent panic lows.

[JasonC]

Um, those are highs. The dollar was worth *more* at the peak of the crisis, a significant portion of which came from *appreciation* of the currency. From Bear Stearns day to Halloween, the dollar *rose* nearly 25% against the Euro. A big part of the panic was men dumping their commodity bets to repay their dollar borrowings, because the latter used to carry the former on an epic scale, were soaring in real cost.

[the invisib1e hand]

I’m not sure what you’re saying, but the USDX has not taken out its 2008 lows.

[GOPJ]

Dems are bankrupting us...