As per economy slowdown and possible rate cuts in the USA for the near future, it is evident that million’s of traders, under estimate the power of the Dollar, during economic downturns.
Over and over again the Dollar outperform major currencies during downturns in the USA. Despite the slowdown in the USA economy, the Dollar rose and did not collapse.
Graph 1: US Annual growth rate (blue), USD (black).
As per Graph 1 above, the USA economy and the Dollar moved on 3 occasions in an inverse relation. In general the Dollar moves in a inverse relation to its GDP and it is more evident during a slowdown. Whenever there is a expansion in the GDP of the USA, the Dollar tend to decrease against major currencies, but during recessions or slowdowns the Dollar increase against the basket of currencies.
Based on the Graph:
The early 1990’s: During the early 1990’s (collapse of the Japanese economy) the Dollar rose despite the slowdown in the USA, GDP.
http://dot.com bubble: Again the Dollar rose viciously against the basket of currencies and the USA, GDP slows down.
USA Great Recession: The USA Dollar rose again sharply and the moment GDP start to move in the right direction the USA slows down.
The point I want to proof, is that the USA don’t go down during downturns, but rather up, due to it’s safe haven status and for many this information will be confusing.
Fundamentals is not just about news trading, but in-dept research of currency behaviour based on facts and not what you think.