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Isn’t the Weak Dollar Suppose to Help Manufacturing?
Since the beginning of the year, the US dollar has fallen 5.9
percent against the Euro and 6.7 percent against the Japanese Yen. For many countries, including the US, a weak dollar has caused major
problems ranging from deteriorating export growth to inflation. The one
good thing that the weaker dollar was supposed to do is to save the US
manufacturing sector. Unfortunately, today’s US economic data proved
otherwise. Industrial production dropped 0.7 percent in the month of
April, manufacturing activity in the NY region dipped into negative
territory and even though the Philly Fed index rebounded from -24.9 to
-15.6, it still remains deep in contractionary territory. Unfortunately the depreciating value of the US dollar has failed to
offset slowing demand. The automobile sector has been the hit the
hardest from the double blow of higher oil prices and a weaker labor
market. The US economy is continuing to struggle and there is no doubt
that the Federal Reserve has a tough task ahead of them. Jobless claims
increased last week while the NAHB housing market index fell to 19, one
point shy of its record lows. Tomorrow we are expecting housing starts, building permits and the
University of Michigan Consumer Confidence survey. With many
construction projects still underway in big cities New York, a lot of
inventory has yet to flow onto the markets. Combined with the
uncertainty of the outlook for the US economy, housing starts and
applications for building permits should continue to fall. In such
conditions, it will be difficult for consumer confidence to improve and
as a result, we expect the UMich index to fall to a fresh 26 year low. Dollar weakness should prevail, particularly against the Japanese Yen, Canadian and Australian dollars. by Kathy Lien (Kathy Lien) Disclaimer: Please note that charts and commentary provided by the moderator are for educational purposes only. Any trades placed upon reliance on the moderator’s charts or information is taken at your own risk for your own account. Past performance is no guarantee of future results. While there is great potential for reward trading stocks, futures and options, there is also substantial risk of loss and you must decide your own suitability to trade. Future trading results can never be guaranteed. This is not an offer to buy or sell stock, futures, options or commodity interests. Most trading systems are based on historical formulas which have worked in the past. However, what has happened before may or may not happen again. You can lose all your money trading stocks, futures, and options and you must decide your own suitability as to whether or not to trade. Only trade with true risk capital you can afford to lose. Only trade markets you can properly afford to trade. Properly funded trading accounts typically perform better than those that are not. Never risk more than 2-3% of your account on any one trade. Always define your risk before entering a trade and place a stop to limit your risk. There are no guarantees or certainties in trading. Trading involves hard work, risk, discipline and the ability to follow rules and trade through any tough periods during a system’s draw downs. If you are looking for a guarantee, trading is probably not for you. Most people lose money trading. One of the reasons is that they lack discipline and are unable to be consistent. A system can help you become consistent. Ironically, worrying about the monetary aspect of trading can contribute to and cause a trader to make trading errors. Therefore, it is important to only trade with true risk capital. |
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