Question about the dollar vs the euro

[Nova]

In a few articles, I've read that the dollar being valued at 1.50 to the euro is a benchmark of some kind. Can someone explain why?

[saulteux]

In a few articles, I've read that the dollar being valued at 1.50 to the euro is a benchmark of some kind. Can someone explain why?

I believe that the 1.50 value is some sort of indicator signaling when the dollar drops to that level, it's doomed and our economy's hosed beyond repair. At least, that's my understanding of the significance of 1.50.

[jds6958]

The USD tested that level 3 times which defines it as an important support level. Also, speaking strictly pyschologically, certain numbers carry more weight with the human mind. For example, when gold hits $1000, that will carry a lot of psychological weight, it will likely go above $1000 and then have a stronger than usual correction afterwords before it's continued up trend, all other things remaining the same. Numbers like 1$, $2, $2.50 or $50, $100, $200, and so on and so on, countless examples, just tend to, but not always, be a psychological resistance point.

Also, the fact that the USD broke to all new lows has kind of wow'd mainstream. All of the economists that basically said "the dollar is down so much that it is DUE for a bullish uptrend" or "the central banks and foriegn governments will not let the dollar collapse anymore b/c they have too much invested" have just been given a sign that they may very well be very wrong.

[Nova]

Thank you saulteux. Would you happen to know where I could get more information?

And welcome to the board. :wave

[Nova]

The USD tested that level 3 times which defines it as an important support level.

So are you saying this has happened 3 times previously? So maybe I can compare past historic events?

[jds6958]

So are you saying this has happened 3 times previously? So maybe I can compare past historic events?

The Euro/USD charts it touched support twice I believe, the USD index it touched support twice, all rather recently, so a "historical" perspective is not much valuable as the USD has never been this low.

Here is a chart of the USD index which demonstrates support.

http://www.jsmineset.com/cwsimages/Miscfiles/5810_February2608USD-Dan.pdf

I canceled my chart subscriptions to save more cash so I can't draw a better one at the moment, I can only post others that I find. If I find a USD/Euro chart showing support, wolf, or triangle patterns I will post. They are rather interesting.

[saulteux]

Thank you saulteux. Would you happen to know where I could get more information?

And welcome to the board. :wave

First, thank you!

Second, I believe I got the information from one of the blogs that jds6958 uses as a reference. Not sure which one, unfortunately.

[Nova]

I just read a bunch of articles. Odd how economists can use so many words, yet say so little? One guy even said that he thought dropping the interest rate would help. He obviously is going by a different model than I am.

The Fed can increase money supply. But not control where it goes. Short term money flows to the least risky investment. Or at least that is what I've noticed. Anyway, I gather no one really knows what it means. To me, it means our money supply is too large. Hello commodity inflation & welcome to higher import prices.

[saulteux]

I think the fed's dropping short term rates in an attempt to help monolines and banks shore up the books. Maybe the thinking is that the banks, etc, once they've built up adequate ratios, will again start lending out.

Problem with that is, I believe, that the fed's not put out near enough money. And if the fed were to dump enough money on the economy to bring these ratios into line, there'd be a staggering bout of hyperinflation ala 2001 in Argentina, 1923 German Weimar Republic, or the 100K % inflation in, I think, Zimbabwe.

And, as we all know, wage increases never seem to keep pace with price increases, so as hyperinflation takes hold, due to a massive injection of cash by the fed, people are going to get mighty cheesed off when they realize that they can't afford a poptart, let alone anything else. Lots of rioting, I think, would ensue.

[Nova]

people are going to get mighty cheesed off when they realize that they can't afford a poptart, let alone anything else.

That gave me a chuckle. Nothing makes the average Joe crankier than rising food/fuel prices. Especially in an election year.

Not that I think the situation is a laughing matter.