All this is greatly hurting the ‘greenback’. At the onset of the crisis, it was seen as a safe haven investment, but its lure is slowly fading.
The chart below shows the US Dollar Index (blue line), tracking the dollar’s performance against six other major currencies from November 2008 to date. During its recent attempt at a rally (circled), it failed to revisit its March levels. Not only that, since then, it has broken below its 200-day moving average (DMA; green line). This is a bad technical sign.
The US dollar index is taking a tumble
Chartists say the dollar index is ‘on track for its third consecutive close below the 200 DMA’ which is now acting as ‘technical resistance’ (black line). This is a level showing the price at which the index has trouble breaking above. If it does trade at this price, it is unlikely to exceed it for a certain amount of time.
The US’s stimulus spending and rising budget deficit are sending the dollar tumbling. As money supply rises, the currency’s value plummets.
The dollar’s downtrend shows that investors are losing faith in the currency. It now remains to be seen whether it will succeed in holding onto its dominant status.
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