Friday, September 21, 2007

The euro kicks sand in the dollar's face

There's hope for the greenback yet! Sure, by reaching 1.42 against the euro, the dollar sure looks like a 90 pound weakling at Muscle Beach. But take a look at this 30 year graph (before 1999, the ECU --the euro's shadow predecessor--is used):

It looks like 1.4 dollars per euro (approximately) is a pretty hard ceiling!

Just kidding. It's most likely coincidence, unless some strange technical analyst voodoo is taking place.

But there's a real pattern here: dollar lows coincide with U.S. recessions AND oil price surges (in 2001 the first condition is met, but not the second). Correlation is not causation, but this certainly seems to support the dollar-oil price link many have been talking about lately.