Many central banks around the world are now trying to ease their monetary policies by devaluing their currencies. The Bank of Japan and the European Central Bank (ECB) have been two major central banks that are performing their own version of quantitative easing or bond buying in order to create inflation. These major central banks are all in and really have no other alternatives but to continue and print money over the next couple of years. This tells us that the U.S. Dollar will strengthen by default as long as these other currencies continue to weaken.
Wealthy investors outside of the United States want to own U.S. Dollars instead of their native currency. Regardless what people think, the United States is still the best house on a bad street. Wealthy investors still have the most faith in the United States government and U.S. economy. Until this mindset changes, wealthy individuals outside of the U.S. will continue to hoard U.S. Dollars.
The technical chart pattern on the U.S. Dollar Index indicates a move up to at least the $105.00 level. Remember, the U.S. Dollar Index is a measure of the value of the United States Dollar relative to a basket of six foreign currencies such as the Euro, Japanese Yen, British Pound Sterling, Canadian Dollar, Swedish Krona, and the Swiss Franc. Traders should note, the Euro and the Japanese Yen are the two most heavily weighted currencies that trade against the dollar in the index.
Nicholas Santiago
Chief Market Strategist
InTheMoneyStocks.com
