U.S. Dollar Decline – August 2, 2012 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 charts to enlarge images)

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):

Lastly, a chart of the Dollar on a weekly LOG scale.  There are some clearly marked  channels here, with a potential large, prominent triangle featured (shown with two potential lower trendlines, one red and one dashed light blue line):

I will continue 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 1375.32 as this post is written

1 thought on “U.S. Dollar Decline – August 2, 2012 Update”

  1. Ted, wouldn’t you say the benefits of bringing jobs back to the USA is a big benefit of a low dollar? Remember when all the automakers put up plants in the South. According to them, it was because of the low dollar. It’s not only jobs, but plenty of spillover benefits, as well.

    Given that Japan (back in the day) built their economy on a weak currency, as China is doing now, why is a strong currency good? What exactly are the benefits for us ordinary people? Other than cheap vacations overseas and cheap imports.

    I’m not being belligerent or sarcastic – I am genuinely interested to know why a weak dollar is so bad…

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