USD Chart Bumpy, But US Dollar Index is Still Bullish

At EconomyWatch.com one of the things we emphasise is the unique structural position of the US in the world economy. This inbuilt advantage will help the US Dollar on a bullish run this year, according to the analysts over at ForexCare.net.

At EconomyWatch.com one of the things we emphasise is the unique structural position of the US in the world economy. This inbuilt advantage will help the US Dollar on a bullish run this year, according to the analysts over at ForexCare.net.

At EconomyWatch.com one of the things we emphasise is the unique structural position of the US in the world economy. This inbuilt advantage will help the US Dollar on a bullish run this year, according to the analysts over at ForexCare.net.

In fact they pick up on David Caploe’s analysis of the structural problems with the Eurozone – that it is a monetary union but not a fiscal one – to talk about untenable debt loads and unworkable politics. [br]

They go on to talk about the position of the US dollar being the world’s reserve currency, and how this bodes well for the US Dollar Index – USD Chart Bumpy but US Dollar Index Still Bullish.

While the US also faces untenable debt loads and broken politics, it has one unique advantage. The US Dollar is the world’s reserve currency. The world’s economy is built around the need for all countries to either export directly to the US, or to other countries that export to the US, in order to gain access to the US Dollar, the fundamental currency of trade, particularly in oil and technology.

This gives the US Economy inbuilt advantages that its trading partners simply do not have.

In the short term, there are also reasons to believe that the  $USD is headed back up.

The chief downside risk for the Dollar was the non-farm payrolls report, which came out on Good Friday. In the event, 162,000 Americans found work. This was the first meaningful reduction in the unemployment figures since the start of the Financial Crisis, only the second positive month in the last two and a half years, and the biggest growth for three years.

This news, with some political grandstanding to say that the American recession is officially ‘over’, is a positive signal for the US economy and therefore the US Dollar. Conversely, it may increase investors risk apetite, leading to more interest in shares and commodities, as evidenced by stock markets hitting 18 month highs and oil reaching close to pre-Crisis levels.

It could even signal both, to the detriment of all the major trading partners in the USDX basket (Europe, Japan and the UK).[br]

Technical analysis of the USD chart supports that view in our opinion. The $USD continues to trade above its 50 Day Moving Average, which looks like reasonably solid support for the next few months, as it has been since the December 2009 breakout.

Incidentally if you want to know how the US Dollar index is made up, the article starts with some solid background information.