Watching The US Dollar In 2018 – Craig Hemke

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by Craig Hemke, Sprott Money:

After a major downside surprise in 2017, one of the biggest stories for 2018 will be the relative value change in the US dollar.

We say “relative value change” because, of course, the US dollar is typically measured by changes to the US Dollar Index. This index compares the value of the dollar to a basket of other major fiat currencies. So when we say, “the dollar is falling”, what we’re really saying is that it is depreciating versus the euro, yen, pound and others. See below:

2017 began with the general consensus that the US dollar would strongly rise in the months ahead. Almost all Wall Street economists predicted this, and it led the venerable “Economist” magazine to print this cover in late 2016:

Well, a funny thing happened on the way to a dollar resurgence. . . . The index actually fell …and, in fact, it fell quite sharply. It seems that though The Economist believed a dollar rise was coming, Janet Yellen and President Trump said otherwise.

And now here we are again at the start of a new year …and, once again, predictions of “dollar strength” abound. But is that about to play out? The chart below from the first trading day of 2018 appears to disagree. Note the breakdown below 92 with what appears to be a test of the 2017 lows near 91 coming very soon: 

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