Some traders may remember the historic selloff in the U.S. dollar that began in late 2002. Current conditions appear similar.
Notice on this chart how the U.S. dollar index pushed to a new 52-week low and then consolidated. Notice how the 50-day simple moving average (SMA) tried to turn higher but failed. Notice how DXY also tested the 100-day SMA and failed.
Now look at this chart from 2001-2002, showing similar events. Also consider that both 2002 and 2020 followed periods of dollar strength and troubles overseas. The late 1990s had the global debt crises, while the last 5-8 years had ongoing weakness in Europe.
Speaking of Europe, everyone’s waiting for a deal between Westminster and Brussels to avert a “hard Brexit” on December 31. An agreement ending the uncertainty would probably spur confidence in the euro and drag the dollar index lower.
Finally, consider that the dollar’s breakdown in late 2002 was followed by several years of global stocks outperforming. Something similar could occur now, especially given the ongoing strength in Chinese stocks and relative “cheapness” of European stocks (based on P/E ratios).
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Notice on this chart how the U.S. dollar index pushed to a new 52-week low and then consolidated. Notice how the 50-day simple moving average (SMA) tried to turn higher but failed. Notice how DXY also tested the 100-day SMA and failed.
Now look at this chart from 2001-2002, showing similar events. Also consider that both 2002 and 2020 followed periods of dollar strength and troubles overseas. The late 1990s had the global debt crises, while the last 5-8 years had ongoing weakness in Europe.
Speaking of Europe, everyone’s waiting for a deal between Westminster and Brussels to avert a “hard Brexit” on December 31. An agreement ending the uncertainty would probably spur confidence in the euro and drag the dollar index lower.
Finally, consider that the dollar’s breakdown in late 2002 was followed by several years of global stocks outperforming. Something similar could occur now, especially given the ongoing strength in Chinese stocks and relative “cheapness” of European stocks (based on P/E ratios).
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
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