国际英语新闻：Indications of a currency war under way?

The first issue is to decide how far the dollar can fall before it finds support. The second question is to identify the barriers the dollar must overcome before it can rise.

The weekly chart of the US Dollar Index against a basket of currencies shows strong historical support is located near $0.745. This marked the low point for the dollar in 2009 October. This support level is the upper edge of a wide trading consolidation band. The lower edge of this band is near $0.715. This low level consolidation was reached between March and August in 2008. A fall below $0.745 has a downside support target near $0.715. In this situation after the fall the strong resistance level is located at the old support level near $0.745. The historical behavior of the Dollar Index suggests a move below $0.745 could lead to several months of rally and retreat behaviour between $0.715 and $0.745.

The Dollar Index has developed a fan pattern. This is defined by an upper and a lower trend line. The lower trend line acts as a support level and allows the dollar to slide down this line towards the next horizontal support level, currently near $0.745. The upper trend line acts as a resistance level with a current value near $0.78. A sustainable rebound in dollar strength is shown only when the Dollar Index is able to move above $0.78 and also break above the historical resistance near $0.795.

The probability of a strong dollar rebound is low and the trend suggests there is a high probability of a fall below $0.745. This consistent dollar weakness will be reflected in other currencies and will support a continued rise in the price of gold. A sustained debasement of the US dollar does not provide a structural solution to the problems of the US economy. The already low dollar has not translated into a significant increase in US exports and domestic demand can only be stimulated by more credit spending. The strong downtrend suggests support at $0.74.5 will not be successful.

Intentionally or not, many see the US Dollar Index chart echoing with the first shot of a currency war.