Unfortunately
the chart does not show the 70’s but I can vouch for it as I was deep into
exchange rates as I was in international trading. That was the golden years for the dollar and
despite its strength the world also at that time could not get enough of our
raw materials – including agriculture.
You will
also notice that we had another purple patch in 2011-13 but for the bulk of the
last thirty years the dollar has been at the vagaries of foreign exchange
markets and the dollar has been shaken all over the place. Unfortunately that is likely to continue as
the dollar is free floating according to market forces as opposed to some
currencies which are ‘fixed’ by government.
So can the
dollar fall to 50 cents? Well back in
2000-2 it got a taste of the dunce’s corner.
It was a painful period. We felt
unloved. We could not travel. Nobody wanted our goods. We could import as much as we wanted really
cheaply but we were not in the mood.
Like most of the world we had a dose of the blues as that was the last biggish
recession before the GFC bust of 2008.
If we
continue to look at the big picture but zoom in and apply Elliott we see a
projection only as low as about 70 cents:
Click to Enlarge
And we were
there before in about 2008/09 – the more recent recession. So you can see our dollar is a litmus test
for the health of the global economy.
The above
chart is a 90 week. If we look at a 300
week we see a much lower dollar:
Click to Enlarge
To a low of
possibly around 60 cents – a popular level that many economists enjoy to
headline – people like to think in round numbers – easier for the front-page.
But you
will note that we could also see a rising dollar back up to 90 cents.
Some analysts
are paid to project exact levels. But I
also know that consensus forecasting rarely works. So I am inclined to hedge my
bets. And I know from coal face experience
that we will continue to see a volatile dollar.
If the wall paper is peeled off the China economy there is no saying
what might happen.
So my last
chart is the monthly:
Click to Enlarge
And it says
we could be all hopping on a plane in two years.
But beware
the ‘X’ factor.
Enjoy the ride
Tom Scollon