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US Dollar Index Review Aug 10

Good day forex trading koalas.

With the recent focus on the US economy, it would be a good time to do a review of the US Dollar index again.

We last visited this in May 10 and i mentioned that the US Dollar Index was facing a resistance area. The Euro Zone budget deficit crisis was ongoing at that time and risk aversion was strong. Nonetheless the US’s very own budget deficit remains high too, together with the weak housing and employment markets.


Source: Bloomberg.

Looking at the US Dollar Index 6 months chart above, we can see that the resistance i mentioned in late May 10 did turn out to be a strong one, causing the index to test the region of 80 before the current bounce up.

Recently, the Euro Zone budget deficit crisis began to give up it’s center stage position in the media. In place, the US started to enjoy increasing media scrutiny. With the poor housing market data, investors and media were calling this the double dip recession and together with the high unemployment rate, posing a great threat to the recovery of the US economy.

To shed more light onto this perceptive, let’s take a look at some figures.

  • In the previous review the total outstanding public debt was $12,987,916,782,708.55. The latest from TreasuryDirect.gov as of 26 Aug 10 is a total public debt of $13,376,189,739,693.61. The debt is increasing.
  • Unemployment rate remains high at 9.5%.
  • Ever since the end of the housing tax credit, home sales data have been disappointing to say the least.

In a recent article, it was commented that a recent IMF report painted a bleak outlook of the US fiscal policy. A larger than budgeted adjustment would be required to stabilize debt to GDP. The writer mentioned that a doubling of the taxes would be required. A upcoming challenge would be the 78 million post war baby boomers who when fully retired, will be collecting benefits from the various social security schemes.

The US is indeed in a complicated situation.

Trade Safely.

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