I felt the need to put the recent dollar weakness into some broader context. So last weekend, I showed this simple 15 year chart of the dollar, showing the huge 41.5% coolapse from 2001-08, versus the current 15+% drop.

The feedback was surprisingly; apparently, many of those currently freaking out about the dollar missed it last time.

Today, let’s show an even longer term chart — this one, incorporating the 1980s collapse — the worst of the 3 we have experienced in the past 40 years.

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click for ginormous chart

Annotated chart via David Singer

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Previously:
Dollar’s Biggest Decline? 2001-08 (April 23rd, 2011)

Currency Wars! (October 11th, 2010)

Category: Currency, Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

25 Responses to “The US Dollar, Annotated”

  1. BPLipschitz says:

    One important question to ask might be (as in sailing), “What’s it rate?” IOW, what’s the *rate* of each of the declines, and does that rate have a real impact on things?

  2. nofoulsontheplayground says:

    There is some similarity between the current drop and the drop into the 1992 lows. However, the 1992 lows formed an inverse H&S bottom, and any chance we had at that was blown up by the drain in the USD from QE2 last fall.

    Kevin Depew of Minyanville this week reiterated the buy set-ups on the USD, including the long term quarterly DeMark buy.

    Recent strong dollar moves up have been triggered by panic driven flight to quality (2008) and a short squeeze triggered by suspension of mark to market and QE1 (March 2009).

    What will be the catalyst for a bottom and reversal next time? The best bet may be the sovereign debt situation with the PIIGS is going to be the catalyst, combined with continued tightening in China.

    Weakness in some key industrial metals appears to be showing apparent slowing in the Chinese economy the past couple of months.

  3. Sechel says:

    What makes the current drop stand out for me is it’s weakness in comparison to the Euro which has the
    PIIGS to worry about. And lets not forget that all currencies especially the dollar purchase less in terms
    of raw commodities these days.

  4. This explains the upward trending action in gold and silver. I suspect that the dollar downtrend will stay intact until the Fed starts to raise interest rates. The stock markets bullish action over the past few months are artificial. The Fed fears that our economy is in a fragile state, and refuses to tighten monetary policy, but inflation is the drawback. At this point, this financial crisis will continue to unfold despite what the Fed decides to do.

  5. Ted Kavadas says:

    BR,

    Your longer-term historical context is valuable. However, my analysis indicates that it isn’t the drop in the value of the U.S. Dollar that has happened so far that is the issue (although it has had many ill-effects) – it is the potential substantial drop from these levels that is highly worrisome.

    There are many reasons to fear a substantial drop from here…including very poor fundamentals; rocketing Gold and Silver prices; very poor technicals – including an ominous large “triangle” pattern recently broken to the downside; and, perhaps most ominously – official U.S. policy – well-articulated by Ben Bernanke on Wednesday – that indicates a rather indifferent attitude toward the U.S. Dollar’s strength, even though the official theme is one of wanting a “strong U.S. Dollar.”

    I found much to disagree with regarding Bernanke’s comments on the U.S. Dollar. IMHO his analysis on the matter are very myopic, and his conclusions are incorrect.

    For those interested, some of my long-term charts on the U.S. Dollar, including the aforementioned large “triangle” pattern; the U.S. Dollar Index is at 72.99 currently:

    http://economicgreenfield.blogspot.com/2011/04/us-dollar-decline-april-2011-update.html

  6. Singer knows how to Annotate some Charts~

    also, given “…many of those currently freaking out about the dollar…”, keep in mind .. http://www.historyisaweapon.com/defcon1/bernprop.html
    http://www.britannica.com/EBchecked/topic/478875/propaganda
    http://www.amazon.com/s/ref=nb_sb_noss?url=search-alias%3Daps&field-keywords=Toxic+Sludge+is+Good+for+You&x=14&y=19
    ~~

    as an aside..

    http://www.siouxfallsford.com/show.aspx?vid=1594518 U$D ~33, 500

    http://capri-rs.com/ were <U$D ~12, 000 in '85

    164.72/73.12 ~ 2.25 33.5 / 12 ~2.8

  7. scorp99cam says:

    Was it a republican or democrat as president? That seems to be all that matters. If it is republican, the drop is ignored, and if democrat, it is publicized. Probably based on who the base is for each party.

  8. market_disciple says:

    Very nice technical analysis on the USD index.

    USD reversal at 70.70 may provide a nice trading set up to go long the USD and short commodities (Precious metals, oil, etc.) Agriculutures might have shown signs of topping out already.

    The timing may coincide with the end of QE2, China slamming their brakes on inflation, and global debt woes in Europe, US, and Japan.

  9. SINGER says:

    As usual this can play out in several different ways. The recent decline formed a head and shoulders top, which targets 72. http://singerprofitcharts.blogspot.com/2010/11/us-dollar-index-futures-daily.html. The 2008 lows are in that area and that area between 70-72 is a likely reversal zone — IF — we are going to hold the lows. As mentioned by Ted the problem becomes, what happens if the lows don’t hold? If the lows don’t hold you can make some projections based on the breakdown out of the triangle that has formed over the past few years — which would carry to approximately the 56 area. Also, you can start with FIB extensions like -.272 from the 1985 highs to 1992 lows, which will get you into the 50′s as well.

    Remember, this is the DXY, which is mostly about the USD versus the EUR, GBP, and JPY. The more intense current slaughter of the buck is with regard to the A$, NZD, CAD, and Swissy, among others.

    Sentiment is pretty darn bearish on the buck so i would look for a bounce around the prior lows maybe a little higher. If we go into those uncharted waters below the 2008 lows — that could get very ugly.

    Perhaps this weakness will only be “transitory”…

  10. SINGER says:

    PS the FED sucks!!!! I’m with Billy “G-Bone” Gross, Muhammed “I am not Muslim” El-Erian, and Tony “QE2 is a Ponzi Scheme” Crescenzi on this one….

  11. Expat says:

    I have fond memories of 1985 before the Plaza Accords. I was doing the summer in Europe thing with a backpack and a Fodors. But, thanks to the amazing US dollar, I avoided youth hostels and cheap wine. Instead, with the USD at ten francs, I stayed in three and four star hotels and drank real booze.

    My budget then was probably $2000 for two months. Today, that would last me a week tops under similar conditions.

  12. Sechel says:

    I’m very much the Austrian these days. The same Fed that missed housing and the internet bubble now
    knows the inflation that is already above its target is transitory–Pretense of knowledge was only a little
    over 30 year ago and we already think Economics = Physics.

  13. chaz says:

    As is articulated in ‘Bailout Nation’, the Fed’s close-to-zero interest rate policy in response to everything and anything…weak stock markets, weak economy, etc. continues and helps result in a weaker and weaker dollar. And ridiculously low interest rates punish savers and lead to bubbles. I’ll continue to hold my silver stocks!

  14. wally says:

    Fortunately the lower dollar has made us far more competitive and eliminated our trade defecit.
    Right?……. Right?

  15. socaljoe says:

    It is important to remember that the dollar index does not show the value of the dollar… it shows the value of the dollar relative to a basket of the equally flawed fiat currencies of the bankrupt developed countries.

    If the euro were to collapse, for example, I could envision a rally in the dollar index while at the same time the value of the dollar continues to decline.

  16. JimRino says:

    I too wondered why the huge dollar drop during the Bush Years got NO TRACTION in the press, yet, this “drop” has Republican in TERRORS. Was that drop Planned? Rumor has it Cheney moved is money to Euro funds before the long slide.

    Hypocrites.
    Republicans are Hypocrites that Need to be TOLD what to Think.
    The Republican leadership uses their dim witted base as suckers to enhance the leadership’s financial position.
    I call this current era, the Gold Hysteria, manufactured to sucker what’s still left of the Republican base into more asset transfers to either the Koch’s or Murdoch, who’s ever really in control of the party propaganda.

  17. CIGA Monitor says:

    BR

    In the comments to the first post, I referenced a 30 year chart posted at Jesse’s Cafe Americain.

    “CIGA Monitor Says:
    April 24th, 2011 at 12:02 am

    Better yet, look at the 30 year chart to see that the dollar declined by 51% in just 4 years after the Plaza Accord in 1985.

    http://1.bp.blogspot.com/-Yxc8XXWDc0Y/TbELZ72sYLI/AAAAAAAAQi0/MCSaYBtwxTw/s1600/DXVeryLongTerm311.PNG

    Well, I see the 4 years is wrong for the total decline (I just took the comment off the chart) so my post wasn’t perfect, but it’s the essentially the same chart. I just thought you were big enough to acknowledge that someone posted it for you. I’m a little disappointed.

    Did I need to say where I found it, or did I violate some other netiquette point? Certainly the chart, clearly marked as from Jesse’s blog, shows the source with absolute certainty.

  18. DiggidyDan says:

    My Mom asked me how to invest in silver today. . . I told her if she doesn’t know how to invest in it and it’s at record highs, it’s probably not a good idea. That parabola is on borrowed time. . . Ride the blowoff top, set your stops, and hit the exits, the suckers are arriving. (I love my mom, she is wonderful, smart, and caring, and next week is mother’s day and all, but she is definitely not what you would call a savvy investor). Hopefully she listens to me, and luckily she is too busy to follow through on such a whim! *Note to self. . . invest in silver jewelry to give to mom next Sunday. . .

  19. victor says:

    Isn’t a weak,slowly devaluing dollar part of the US Government’s plan of “re-paying” its debt? The other two legs of this strategy are of course deliberate inflation and low interest rates aka “stealth default”; how else can we pay our debt? Remember debt is always paid: either by the debtor or by the creditor(s).

  20. SINGER says:

    @CIGA Monitor – Thats a nice chart! Great minds think alike…lol… Here is one from my blog that was on TBP in SEPTEMBER 2009….

    http://singerprofitcharts.blogspot.com/2009/09/usd-annotated-long-term-us-dollar.html

  21. JimRino says:

    Long Steep Dollar Collapses during Reagan and Bush.
    Almost like there is a Republican “Play book of Failure”?
    Did Reagan officials move their money into Foreign currency at the beginning of his term, and then push the dollar down?

    Was there no uproar about this during Reagan’s term?

  22. cognos says:

    So the USD is down about 5% total since the mid 90s?

    And the main CRB commodity index is up about 2% annual since the mid 90s.

    No long term story on either. Commodities boom, then they bust. Repeat.

  23. machinehead says:

    ‘And the main CRB commodity index is up about 2% annual since the mid 90s.’ — cognos

    As you can verify from this chart at mrci.com, the Reuters CCI index traded under 240 in mid-1995, and is now at 687.66.

    http://www.mrci.com/client/crb.php

    Over 16 years, that’s a compound annual growth of 6.8%. Sorry to trouble you with actual numbers.

  24. DiggidyDan says:

    For the record, I think that may qualify as the local top call. . . thanks Mom.