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U.S. Dollar: The REAL Bear Market Maverick
Who would have thought that despite all the trouble in the U.S., the dollar would gain, not lose?
At Elliott Wave International's Message Board, readers ask us interesting questions daily. In fact, with what's been going on in the markets, lately the number of questions has quintupled. One of the most frequent ones recently has been about the health of the U.S. dollar.
Considering the shape this country is in, goes the question, isn't it logical to assume that the U.S. dollar will become worthless soon? And if so, doesn't it make sense to switch one's savings to a different currency?
Perhaps. But maybe not just yet. Because despite all "fundamental" odds, since mid-July, the U.S. dollar has been gaining strength. The euro vs. dollar exchange rate, known in forex trading world as the EURUSD, has fallen from near $1.60 mid-summer to below $1.35 on October 6. This chart illustrates this incredible 25-cent gain by the greenback:
It seems that with every new bad report about the U.S. economy and the stock market, the dollar has only gotten stronger. How is that even possible?
Conventional economists' explanation for this phenomenon is that in times of uncertainty, global investors flock to the dollar-denominated assets. Despite all the trouble the U.S. is in, it's still a relative "rock of stability" for the world, they say. And that has made the buck a true maverick of the ongoing bear market.
Of course, that's what economists are saying now. What fundamental analyst could have predicted that in spite of everything we've seen happen in the past four weeks, the dollar would gain, not lose?
Once again, it comes down to collective market psychology, not the "fundamentals." And no other method lets you track and forecast it like the Elliott Wave Principle. For the very latest forecasts of the U.S. dollar vs. other world's currencies, see EWI's Currency Specialty Service online now.