EconomicGreenfield

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 1339.67 as this post is written

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 1312.94 as this post is written

Lately there have been a variety of opinions and articles stating that the decline of the U.S. Dollar is either not something to be (unduly) concerned about, or even that such a falling U.S. Dollar will be beneficial.

The logic behind these opinions is various.  One, that is particularly notable, is that the U.S. Dollar has had large declines previous in its history; these declines have occurred with negligible adverse economic consequences.  Based upon these previous Dollar declines, it follows that any large decline now will also be free of accompanying economic damage.

This theory, that previous large Dollar declines have not had severe economic ramifications, is largely true; however, I believe, based upon a variety of factors that these previous episodes are not representative of our current economic situation.

One of the reasons I believe that this U.S. currency decline is not being taken as seriously as it should is that the U.S., unlike other countries, has never experienced a severe decline in its currency that brought on severe adverse economic consequences.

While of course such accompanying adverse economic consequences is contingent upon many factors, including the extent of the currency’s decline,  on an “all things considered” basis I believe there are many reasons to be very concerned about further substantial U.S. Dollar weakness.

Of particular concern is U.S. policy toward the U.S. Dollar, as stated by Treasury Secretary Geithner and Ben Bernanke.  The “official policy” is one supportive of a “strong Dollar.”  However, policy actions seem to contradict the “strong Dollar” statements.

During his April 27 Press Conference, Ben Bernanke made comments about the U.S. Dollar.  I found his reasoning rather myopic in nature, and his conclusions incorrect.  Perhaps most disconcerting was his answer to the question about the potentially problematical impacts of a weak Dollar:

“…I don’t think I really want to address a hypothetical which I really don’t anticipate.”

While a severe drop in the U.S. Dollar can hopefully somehow be avoided, I fear that this probability is low.  As such, I have written extensively about the vulnerability of the U.S. Dollar to a substantial decline and the adverse economic consequences that would accompany such.

We, as a nation, are already seeing the negative manifestations of a weak Dollar, many of which are causing complex problems.  Further adverse impacts from a weak currency are bound to be just as insidious, if not more so.

I think Keynes, from his book Economic Consequences of the Peace, perhaps best spoke of the ill-effects of currency debasement:

“Lenin was right.  There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.  The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1356.62 as this post is written

The U.S. Dollar Index is at 72.78 as this post is written

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 1361.22 as this post is written

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

I have written many posts concerning the vulnerability of the U.S. Dollar to a substantial decline, and the ill-effects such a decline would have on the U.S. economy and markets.

The U.S. Dollar is now at 75.65, and is exhibiting weak “price action” and weak technicals.  As one can see from the following chart, the Dollar is nearing the bottom of its long-term range:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; annotations by the author)

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I would like to reiterate a few thoughts from past posts regarding the U.S. Dollar:

from the January 13, 2010 post:

Many people, especially those of the “hard money” and “Austrian” philosophies, have long held that many of the actions we (as a nation) have been taking to combat our current period of economic weakness would unduly pressure the dollar.  These actions have included very low interest rates, truly outsized interventions (including “money printing”) and deficit spending.

from the July 30, 2010 post:

For many reasons I doubt that the 70.7 level reached in 2008 will serve as any type of significant technical support.  Below the 70.7 level is obviously a “new frontier” with no obvious strong technical support.  In essence, from a technical perspective the downside would appear rather open-ended.

from a February 3, 2011 post on a different site:

I have heard the widespread arguments that conclude a lower dollar as positive and beneficial to the U.S. economy. However, I think these arguments are largely based on the assumption that such a dollar decline would be “reasonable” (i.e. not a sudden decline of unexpected magnitude). However, in my (admittedly very unique) opinion, various technical and fundamental analyses support a substantial dollar decline. My analysis indicates that once the U.S. dollar (currently at 77.07) falls below the 70-area it would likely usher in a new trading environment that would not be supportive.

also:

Should a substantial U.S. dollar decline occur, as my analysis indicates, I think it will prove very detrimental to the U.S. economy and financial markets. Furthermore, it will prove very difficult to reverse.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1309.66 as this post is written

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…

_____

A Special Note concerning our economic situation is found here

SPX at 1329.87 as this post is written

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…

_____

A Special Note concerning our economic situation is found here

SPX at 1296.63 as this post is written