The Consequences of a Strong Dollar
December 23, 2008
I have spoke often about the consequences of a strong currency. In the case of the US, the weak dollar in the first half of the year has helped to contribute to Q2 and for some Q3 corporate earnings as well. However I strongly believe that Q4 earnings will be very bad. Partly because of the global recession and partly because of the strong US dollar.
There is an article in the Wall Street Journal today titled “Stronger Dollar Cools Sales in Overseas Hot Spots” that talk about this same theme.
But I want to show you their charts on US exports:
Source: WSJ
And now take a look at a chart of the Dollar Index:
Source: Bloomberg
Do you see the correlation?
Also, the strength of the Japanese Yen is a big reason why Toyota is forecasting their first loss in 7 DECADES!!
Source: WSJ
Posted in Forex, Forex News, Forex Technicals, forex blog, retail sales
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December 23rd, 2008 at 6:13 pm
Very interesting post. The graphs emphasize your points.
It seems that the Outside Demand graphs react in about a quarter’s delay after a major move in the currencies.
December 29th, 2008 at 12:26 am
I am looking at the daily charts for EURUSD and I see that the fast and slow stochastics not overbought, but the RSI approaching 70 in a decline. Apart from the fundamentals mentioned in the article am I right to say that the MACD has potential to increase too?
March 10th, 2009 at 10:21 pm
Tot of buying GBP since it looks like oversold.. How? Any comments?