Take a look at the chart below. It shows the US dollar index (black line) for the year-to-date. This measures the value of the dollar against six other major currencies. You can see how it’s plunged since March (circled).
At 79.8, it is also trending far below both its 50-day (blue line) and 200-day (red line) moving averages, i.e its average prices over 50 days and 40 weeks respectively. These are both important lines of resistance for the index.
The dollar is on a major downtrend...
Source: Stockcharts.com
The dollar is falling as America loses its appeal as a place to invest. Already, foreign investors are fearful of putting money into US bonds. And American investors are moving into non-dollar assets and precious metals. It’s even possible that the currency will also become unattractive for reserves held by the world’s central banks.
In the meantime, the Federal Reserve continues to print, print, print new dollars. This is pushing America’s budget into an even larger deficit. This massive "money pumping" is a crucial reason for the weakening of the currency.
If the dollar continues sinking, we’ll see foreign appetite for US assets plunge even further. Ultimately the currency’s ‘safe haven’ status will lose its shine.
There’s little or no safety in the greenback anymore. We see no respite for the dollar in its swift downward spiral.
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