(Kitco News) - The U.S. dollar index is a basket of six major global currencies weighted against the greenback. The USDX this week hit a 20-year high, supported by rising U.S. interest rates and safe-haven demand for the greenback and for U.S. Treasuries that are purchased in U.S. dollars. It’s not just that the U.S. economy is stronger or that U.S. interest rates are out-pacing the rate rises in other major economies. Rather it’s a combination of the latter and the fact that the Euro zone is facing an energy crisis and rising inflation that have sapped its countries’ economies and in turn put keen downside price pressure on the Euro currency against the U.S. dollar.
It’s important to note that price trends in the currency markets tend to be stronger and longer-lasting than price trends in other markets, such as commodities. See on the monthly continuation chart for nearby U.S. dollar index futures that prices are trending up from the 2008 low. There are no longer-term chart clues that the USDX is close to a major top, and prices are not yet close to historical highs seen in past decades. More upside is likely in the greenback in the coming weeks and months.
See on the monthly chart for the Euro currency futures that prices are trending down from the 2008 high and this week hit a 20-year low. Odds are high that the Euro will drop below parity with the U.S. dollar in the near term. In the coming weeks and months, the Euro may even challenge its record low of .8245 scored in October of 2000.
