U.S. Dollar to Rebound, as U.S. Stock Market Declines for Next Two Months
September 17 – The decline in the U.S. dollar compared with the euro may have bottomed out, after today touching the low from a year ago. The dollar has been moving in the opposite direction of the U.S. stock market, which slates it to gain as the stock market falls.
“The dollar and the U.S. stock market have been inversely connected during the last few years,” said Allen Reminick, president of Blue Apple Trends.
The U.S. stock market, including the Dow Jones Industrial Average, will lose ground starting early October and last until at least mid-November, said Reminick. In addition, years of China and other countries selling their dollar-denominated assets results in almost a scarcity of the U.S. dollar in those areas, and this could push up the value of the dollar, said Reminick.
The dollar fetched $1.4726 per euro at 1:13 p.m. in New York, from $1.4709 yesterday, and earlier reached $1.4767, the weakest level since Sept. 25, 2008, reported Bloomberg News.
“Supply and demand factors, based upon a diminishing number of dollars in China and other countries, will tend to make dollars more scarce and thus push the price of dollars higher,” said Reminick.
The dollar index has been down nine out of the last 10 days, and is off 2.6 percent this month to date, its worst monthly performance since May, reported Reuters.
According to a technical indicator reported by Bloomberg News, the gain by the euro versus the dollar during the last half-year may be about to change. The 14-day relative strength index on the euro-dollar exchange rate rose to 74, its highest level since March 19. When the index reaches 70, a rally is indicated, Bloomberg said.
The tools of Blue Apple Trends have predicted the major trends in the S&P 500 equity index successfully for the last 44 years, said Reminick. His market research expands the traditional technical approach to cycle analysis by incorporating non-sinusoidal waves, he said. This is instead of relying on the sine-wave or Fourier decomposition approach, he said.
-- Laure Edwards