Dollar Decline
Monday, March 21, 2011 at 05:32PM Somewhat lost in the shuffle amidst today's big rally in stocks was the dollar's move to new lows. In fact, today the US Dollar index broke below its lows from last November, putting it at levels last seen in late 2009. As shown in the first chart below, the dollar has been in a pretty severe downtrend since June 2010.
A chart of the US Dollar index going back to 2007 shows the wide range that the currency has traded in over the past few years. After making its multi-decade low of 71.33 in 2008, the Dollar index rallied up towards 90 as equities declined. Once the financial crisis ended, investors fled the dollar and the index traded down to 74.26. Another rally in 2010 put the Dollar index back at the top of its range near 90, and it has been declining ever since.
With today's move below last November's low, the next level that traders will be watching is 74.26 (the 2009 low). That level will be a key inflection point as the two-year trading range will either hold or break.
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