What's going on with the US $
Posted by jdavis on May 10, 2014
The above is the index of the US $ against a basket of currencies, such as € (c 58% of index), £, CAN$, CHF (Swiss Franc) and Japanese ¥ and (strangely) Swedish Krona.
As you can see the US$ was in confirmed uptrend from the all time low in 2011 to last Summer (red diagonal line indicates).
However, since last Summer the $ has fallen to the White horizontal support line. This has been support - from where it bounced several times - during the last 2 years.
As Sterling based investors what has this meant for the $ : £ relationship?
The above shows the £ : $ price. You will see the £ has risen strongly since last Summer... as the $ has been weak, generally.
As far as we can see the media says the £ has been strong because the UK has higher growth right now than the US.
Maybe. More likely, it is because the US$ has been weak, rather than the £ has been strong.
So, if you ask me where is the £ v $ going? I cannot say. What I can say is the following:
1. The US $ is sitting, right now, at multi year support from which it has bounced several times.
2. The £ : $ shows a weekly bar (candle in the jargon) last week which showed the £ rose strongly but ended the week on a low, near where it started the week. Such a candle, with a top or bottom wick has previously indicated a change of trend or confirmation of new trend, as shown by the arrows.
3. If the $ breaks below support then that's probably it - $ dying and £ to rise further.
4. If $ rises again off support then the opposite to #3.
The level of the US$ is normally important to the level of US share prices and global commodity prices.