There is a good article by Albert Bozzo at CNBC.com.
I have previously posted shorter term charts of UUP, UDN, $DXY and $USDUPX. All of those charts show the Dollar approaching 2008 support levels. This long term chart shows that this support level goes back to 1988. What does it mean? I find it very unlikely that the Dollar crashes right through support. At the very least, there will be a pause and a consolidation zone (which could last months or even years; see 1990-1995 above). I continue to feel confident that the weak Dollar catalyst is going to be removed soon. As I mentioned yesterday, I believe a reasonable explanation of the short term treasuries going to 0% is a bet on a rebound in the Dollar.
And while the US and China weaken their currencies gaining an export advantage, what is the rest of the world thinking regarding their exports?
Over the years prior to the single European currency, German exporters, for instance, howled when the dollar was too weak against the Deutsche Mark; their tolerance level with the Euro/dollar rate is now thought to be 1.55, which is not far from the pre-crisis level of 2008. At roughly 1.48, now the dollar is down about 25 cents since March.
So while this article goes back and forth presenting arguments for a rebound and continued weakness, I takeaway the same conclusion I have had from reading the $USDUPX chart.
There is only a little room left before the Dollar finds support. Europe, Australia and Canada have been quiet. Perhaps those countries are quiet because they have agreed to give the US the flexibility to run the Euro up to $1.55. We’re now almost out of rope. Maybe these central bankers read charts too?
