Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

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Thursday, August 25, 2011

Where Is the Dollar Going

A couple of weeks ago I foolishly boldly made a number of predictions about certain economic indicators.   One of these was the dollar index.   We haven't looked at it since the beginning of the year.  This is a good time, since Menzie Chin has a long post on the subject today.   Menzie wishes for continuing depreciation "to effect global rebalancing."  He includes a lot of graphs, but none of them provide a detailed look at the results this year.  FRED to the rescue.

We see a not-particularly-neat down-slanting trend channel (green) to an all-time low in April.  After that point there's a jump to the top of the channel, and a dance along the top line through mid-Summer.  In the last few weeks, the Buck has drifted sideways, with most of this action happening in a new trend channel (purple)  that I am imagining

Menzie's post includes an excerpt from a paper by Catherine Mann of Brandies University. She concludes that a variety of factors, including "a long-run chartist view, suggest that the trend dollar depreciation has reached an end."

Well, there's the chart, I guess.  At least I'm not alone in my assessment.  If the dollar pops convincingly through the top of the purple channel, it could rise for quite some time.

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