The U.S. Dollar: A Marathon, Not A Sprint

The US Dollar has come into the favor of many Wall Street participants in recent weeks. As shown in the charts below, the short-term action of the currency has been bullish, but the longer-term technical picture remains bleak. Using one of the oldest sports cliches in the book, Dollar bulls need to treat this as a marathon and not a sprint.

At its current level of 73.54, the US Dollar index is trading just off the bottom of its long-term downtrend. The next level for bulls to watch is the top of that downtrend at 77. If the currency can break above there, the marathon for a strong Dollar will be about 10% complete.

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Comments

[AmesTiedeman]

One cannot expect a strong dollar with an 800 billion dollar trade deficit!
This will take 25 years to correct.

[captbob]

As long as we are paying trillions in debt with 1/2 value newly printed fiat dollars, any thought of a "strong dollar" will become a distant memory, never to be seen again.

[dlaw]

I think there's a "behavioral" thesis here, although because currencies are so intimately tied to other markets, we don't know exactly where the behavior is coming from.

That said, the nice thing about a behavioral thesis is that it is If the dollar can keep from falling off the shelf for the next few weeks, it will have shown a change of regime and I think we can expect less volatility and a relatively stable price outlook.

Personally, though, I would still bet on EUR/USD to go through $1.60 with a bullet. I'm not a betting man, though.

[syruppy]

Europeans are now flying the US to shop, which is exactly the sort of thing that Econ 101 says will happen, is happening now.