OT: Upsetting the Force

Since April 17, the US Dollar Index has increased by 6%. I generally read my goat entrails and rolled knucklebones to expect the US equity markets to act inversely to the dollar index. While it is true that there is currently an influx of cash from the EU that could be buoying stocks a bit, this sudden uptick of the DXY generally indicates severe market volatility.

Be careful out there.



US Dollar index dropped .8% today and the immediate pressure causing this has been relieved.

While the US dollar index at a high level for an extended period of time will, of itself, damage equities, its slope and trajectory are far more frequently useful as a short term leading indicator reflecting both bond and equity price moves. The bond market, being far larger than the stock market, is the usual major driving force behind the movement of the value of the greenback and its action on the equity market is generally derivative. As the bond market is frequently a function of the flow of currency into (or out of) the US dollar, the Forex market is the driving force behind much of the activity in the bond market.

As there is no more gold standard, the value of currency itself is merely a combination of its relative value when compared to others on an external basis and, to those within the zone using a specific currency, how much is required as well as the ease/difficulty of attaining that quantity to live at the desired standard of living.

Simplistically, if you follow the money, all will become clear :slight_smile: