Pundits everywhere are in an uproar over the recent strength of the U.S. Dollar. Could this be the end of years of USD weakness? Is there finally light at the end of this tunnel? Is the greenback about to make a comeback?
OK, it's time for a reality check. Here is a daily chart depicting the past 12 months of activity in the Euro – U.S. Dollar currency pair. In currency trading, the chart follows the first member of the pair, so you are seeing the Euro climbing relentlessly vs. the U.S. Dollar. No indicators are needed to show the damage heaped upon the buck by its European counterpart over the past year. When we step back and look at the recent activity in this perspective, the pullback is a shallow move indeed.
Is it possible that the USD could continue to strengthen and turn this into a major retracement move? It's possible, but it hasn't happened yet. The next time you see or read about the mighty greenback, take a look at the chart to gain perspective. Sometimes, we have to take what we read and hear with a grain of salt.
