Meltdown 101: What would be better for the economy right now -- a stronger or weaker dollar? 
Would the U.S. economy be better off if the mighty dollar weren't so mighty?
The dollar has strengthened against most other major currencies for much of the second half of the year. It recently reversed course, but the big picture remains the same: The Thomson Reuters U.S. dollar index, which measures the dollar's value relative to the euro and the Japanese, Canadian, British, Swedish and Swiss currencies, is still up more than 10 percent from its lows in March.
All the while, the economy has been wallowing in a deepening recession.
Does the strong dollar have anything to do with the nation's economic woes? What would be better for the economy right now -- a stronger dollar or a weaker one?
Here are some questions and answers about the strength of the dollar:
Q: Should we be rooting for a stronger or weaker dollar right now?
A: In a broad sense, a weak dollar is probably favorable while the economy is ailing, since it would make U.S. goods cheaper to consumers outside the country.
"The dollar is really a shock absorber," says Brian Bethune, economist at IHS Global Insight. "When domestic economic conditions are weak, it goes down to stimulate demand for U.S. product overseas."
Q: So why have we seen such dollar strength in recent months?
A: The dollar, which had already been on a multiyear losing streak, began to weaken further in late 2007 and early 2008 as it became clear the U.S. was heading into a recession. But as the global economic outlook soured, investors flocked to the safest assets around: U.S. Treasury bills, notes and bonds. (In other words: investments in U.S. government debt.)
Because Treasury investments are denominated in dollars, this trend pushed up demand for greenbacks -- and more demand translates into a stronger dollar.
Q: How has that hurt the U.S.?
A: The stronger dollar has come at a bad time. It made U.S. goods more expensive overseas as the economies of many major U.S. trading partners are mired in recession. That has weakened the demand for U.S. goods, which has caused exports -- a rare bright spot in the U.S. economy earlier this year -- to fall hard.
The drop in exports could lead to more job losses, at a time when employment is already declining at the fastest pace in decades.
Q: But doesn't a strong dollar help by making imports cheaper?
A: Yes, and we've seen import prices fall hard, too. Especially for one of the country's favorite imports: oil.
Some economists think declining imports will outpace what we're losing in exports, narrowing the trade deficit. That could add to gross domestic product -- the broadest measure of the nation's economic health -- and help the economy.
But in October -- the latest month for which data are available -- exports fell at a greater rate than imports, and dollar strength was one reason why. The trade gap widened to near record levels.
Q: What about the impact on U.S. businesses?
A: It depends on how much of a company's revenue comes from outside the U.S.
For a multinational company like Nike, for instance, their goods become more expensive overseas as the dollar strengthens, which could give their competitors an advantage. For companies that sell most or all of their products in the U.S., such as Family Dollar, a stronger dollar is good for the bottom line, because there's more buying power in each dollar the company earns.
Many companies have been lowering their profit outlooks due to the dollar's second-half strength, as the same amount of sales overseas translate to fewer dollars than in previous quarters.
Q: What are the positives of a stronger dollar?
A: The risks of inflation subside, and that's normally a good thing. Right now though, inflation is less of a worry than weak growth.
Still, there's a bright side: Low expectations for inflation have made it easier for the Federal Reserve to lower interest rates to help spur the U.S. economy -- a move that usually carries serious inflation risks.
Q: What's better for the U.S. consumer?
A: There are several ways a stronger dollar can benefit regular folks.
First, the foreign goods we buy -- like cars or handbags -- become less expensive. Those who invest abroad, even through mutual funds, can get better values on assets. It also makes it cheaper for Americans to travel abroad, and it can also boost consumer confidence, if workers feel their paychecks are stretching further.
Of course, all those benefits become moot if you lose your job because your multinational employer -- struggling to compete overseas because of a strong dollar -- has to resort to layoffs.
Q: There have been recent stretches when the dollar turned the other way and weakened. Why did this happen?
A: The Fed has cut its target interest rate to close to zero and it's vowed to take further steps to keep rates low. That sends a signal to investors that the U.S. economy remains in dire straits, and it gives investors less of an incentive to hold interest-bearing investments denominated in dollars. Reduced demand for such investments can push the value of the dollar downward.
Key short-term interest rates in the U.S. are among the lowest in the world's industrial nations -- on par with Japan, which has fought for years to keep its rate low.
Q: What should we expect in the near future?
A: There are many variables that make predicting currency strength a near-impossible task, but some analysts and traders suggest the stage is set for a return to weakness against other major currencies, especially if other industrialized nations are less aggressive in cutting interest rates. Also, if the Fed continues to pump dollars into the economy, as it's promised to do, the increased supply of the currency could push the value of the dollar further downward.
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Meltdown 101: Is a Strong or Weak Dollar Better?
Forex Sentiment Accurately Forecasted Massive Swiss Franc Rally
USD/CHF Ratio: 1.10
Trading Forecast: Bearish
USDCHF – The ratio of long to short positions in the USDCHF stands at 1.10 as nearly 52% of traders are long. Yesterday, the ratio was at 1.10 as 52% of open positions were long. In detail, long positions are 41.9% higher than yesterday and 16.7% stronger since last week. Short positions are 40.9% higher than yesterday and 54.6% weaker since last week.
Open interest is 41.4% stronger than yesterday and 48.0% below its monthly average. The SSI is a contrarian indicator and signals more USDCHF losses.
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Bids and Offers
When you’re in front of your screen and looking at an online forex broker’s trading platform, you’ll see two prices for each currency pair. The price on the left-hand side is called the bid and the price on the right-hand side is called the offer (some call this the ask). The “bid” is the price at which you can sell the base currency.
The “offer” is the price at which you can buy the base currency. Some brokers display the prices above and below each other, with the bid on the bottom and the offer on top. The easy way to tell the difference is that the bid price is always lower than the offer price. The price quotation of each bid and offer you see will have two components:
The big figure and the dealing price. The big figure refers to the first three digits of the overall currency rate and is usually shown in a smaller font size or even in shadow. The dealing price refers to the last two digits of the overall currency price and is brightly displayed in a larger font size.
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EUR/CAD Day Trend
You will generally see the trend begin to flatten out and begin to trade within a defined and repeated level of support and resistance. We would like to see this on a Daily and/or 4 hour chart...a range on "minute charts" is not established enough to trade without a greater element of risk.
Ideally, one would want to see at least two tests of support and resistance before declaring a range to be in place.
To trade a range, a trader would go long at support with a stop just below support or short at resistance with a stop just above resistance. The higher probability range trades will be those in the direction of the overall trend on the Daily chart. Also, when price action breaks out of the range, the breakout will likely (although no guarantees) be in the direction of the trend.
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NASA Selects SpaceXs Falcon 9 Booster and Dragon Spacecraft for Cargo Resupply Services
NASA Selects SpaceXs Falcon 9 Booster and Dragon Spacecraft for Cargo Resupply Services to the International Space Station
F9/Dragon Will Replace the Cargo Transport Function of the Space Shuttle after 2010
-NASA today announced its selection of the SpaceX Falcon 9 launch vehicle and Dragon spacecraft for the International Space Station (ISS) Cargo Resupply Services (CRS) contract award. The contract is for a guaranteed minimum of 20,000 kg to be carried to the International Space Station (ISS). The firm contracted value is $1.6 billion and NASA may elect to order additional missions for a cumulative total contract value of up to $3.1 billion.
“The SpaceX team is honored to have been selected by NASA as the winner of the Cargo Resupply Services contract,” said Elon Musk, CEO and CTO, SpaceX. “This is a tremendous responsibility, given the swiftly approaching retirement of the Space Shuttle and the significant future needs of the Space Station. This also demonstrates the success of the NASA COTS program, which has opened a new era for NASA in US Commercial spaceflight.”
Under the CRS contract, SpaceX will deliver pressurized and unpressurized cargo to the ISS, and return cargo back to Earth. Cargo may include both NASA and NASA-sponsored payloads requiring a pressurized or unpressurized environment. SpaceX will provide the necessary services, test hardware and software, and mission-specific elements to integrate cargo with the Dragon delivery capsule.
In 2006, SpaceX was named a winner under NASA’s Commercial Orbital Transportation Services (COTS) competition. Under the existing COTS agreement, SpaceX will conduct the first flight of its Falcon 9 launch vehicle and Dragon spacecraft in 2009. The final flight, currently scheduled for 2010, will demonstrate Dragon’s ability to berth with the ISS.
Falcon 9 flight hardware has already started to arrive at the SpaceX launch site, Space Launch Complex 40 (SLC-40) at Cape Canaveral, in preparation for Falcon 9 going vertical on the pad within a few weeks. Construction of the SLC-40 launch site is proceeding ahead of schedule and is estimated to be completed in early 2009.
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Dollar Rises Amid Economic jitters
The U.S. dollar gained strength against major currencies Thursday as economic worries about the state of the global economy persisted and the number of U.S. workers filing for first-time unemployment benefits fell more than expected.
The yen retreated from the 13-year high it reached against the dollar Wednesday ahead of an interest rate decision from the Bank of Japan. The Japanese currency fell against the dollar Thursday, increasing to ¥89.43 from ¥87.23 late Wednesday.
At 0.3%, Japan has the second-lowest rate among the world's major economies and investors were taking a step back ahead of Friday's announcement.
The 15-nation euro fell nearly two cents to $1.4243 from $1.4418.
The European Central Bank's next meeting is set for January, and investors are watching to see whether the bank will keep its rate firm after slashing it to 2.5% earlier this month.
The British pound dropped more than five cents to $1.5011 Thursday from $1.5534.
Currently, the Bank of England's rate remains at 2%, the lowest in the bank's history, and policymakers are slated to meet in January to discuss the rate.
Economy
The number of Americans filing for first-time unemployment benefits fell more than expected last week, according to a government report released Thursday. Initial filings for state jobless benefits fell to 554,000 for the week ended Dec. 13.
Oil prices fell below $37 a barrel Thursday, reaching level not seen since June 2004. Investors continued to shrug off an upcoming OPEC production cut announced on Wednesday, after which oil closed at a 4 1/2 year low.
Concerns ahead
On Tuesday, the Federal Reserve cut its federal funds rate from 1% to a range between 0% and 0.25%, the bank's 10th cut since September 2007.
While interest rate cuts are the U.S. central bank's main tool for boosting economic activity, many currency analysts worry about the long-term effects of lower interest rates on the dollar.
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