Will the US Dollar Fall Over the Next 12 Months?

Podcast:

#377: Will the US Dollar Fall Over the Next 12 Months?

In this video:

00:26 – A great question from someone on my webinar

01:12 – Some examples from the last 17 years

02:09 – The EUR/USD got very high in 2008

03:05 – The GBP/USD went over 2.0000

04:10 – What does this tell you as a trader?

Will the U.S. dollar decline over the next 12 months, and if so, how do you trade it? Let's talk about that and more, right now.

Hi, forex traders. Andrew Mitchem here, at the Forex Trading Coach, with video and podcast number 377.

A great question from someone on my webinar

Now, I held a webinar just this morning and it was a free webinar for the public to attend. I had a great question asked on that webinar, and I'd like to read it for you and then answer the question. The question was, "Hey, Andrew. Look, there's a lot of talk these days about the U.S. dollar, and that it's going to decline over the next 12 months. Which U.S. dollar pairs would you recommend using to take advantage of this potential decline?" Fair enough question, you'd think.

So my answer was, well, you cannot trade that way. You just cannot, because it means that you are now having a predefined ... in your mind, you are set on the U.S. dollar falling, and it's quite a dangerous way to trade because how does anybody know what's going to happen?

Some examples from the last 17 years

Give you some prime examples on this over the last number of years. So I've been trading for nearly 17 years and over that time, to be honest, actually, when I started trading, the U.S. dollar was talked down massively at that time. Everybody was talking up the Euro, talking up the pound, talking down the U.S. dollar, and that's not really happened. Within certain times over those last 17 years, yes, the U.S. dollar's declined, but then it's strengthened.

The problem is, you cannot have that bigger picture idea, and back when I started trading, the monthly non-farm payroll, as it was called back then, the U.S. monthly unemployment data, the U.S. jobs news back then all the time was terrible. Huge numbers of job losses, and people were saying, "It's the end of the U.S. dollar. The Euro's going to take over. The new Euro, all these amalgamated countries. It's the new thing to do. You've got to be on to the Euro."

The EUR/USD got very high in 2008

So, give you some examples. Back then, the Euro got as high as 1.60. It got very, very high, the Euro against U.S. dollar, 1.60. Then, from mid-2008 onwards, if you look at a monthly chart, overall, all it's done is fallen. Like I mentioned just now, yes, there have been times where the Euro-U.S. dollar has gone up, and therefore the Euro is strengthened, the U.S. is weakened. But if you take the bigger picture since mid-2008, when the Euro-U.S. dollar hit just on 1.60, all it's done since then is fallen. So that tells you that actually, what's happening is the Euro is weakening and the U.S. dollar is strengthening. So if I had that bigger picture view back then of the U.S. dollar as weakening and declining, for the last 12 years, in general, I would have been wrong. So very, very dangerous thought process to go into there.

The GBP/USD went over 2.0000

Another example, the pound-U.S. dollar. Back in 2007, it went over two. So the rate of the pound-U.S. dollar was over two, 2.000. It went over that level and then it crashed to 1.14. So all it's done is the pound's dropped, the U.S. has strengthened. Again, everybody said the U.S. dollar would weaken, and all it's actually done, again, bigger picture, and there's been fluctuations, yes, within that time, but bigger picture, the pound's dropped, the U.S. dollar has strengthened.

Then, of course, we add Brexit into that, and everybody again saying, now, that the U.S. was going to probably strengthen against the pound, therefore now the pound's going to weaken.