Investors should remain bullish on the dollar because issues within the U.S. economy pale in comparison with those in Europe and Australia, according to John Taylor of FX Concepts LLC.
The dollar is in a “box” between the important technical level of $1.29 per euro and downtrend levels of $1.3050 to $1.31, said Taylor, the founder and chief executive officer of currency-hedge fund FX Concepts LLC, which manages $3 billion. A closing price below $1.29 would be a “very bad” technical signal, Taylor said. The greenback will see a “significant” move after it breaks out of this range, he said.
The dollar gained 0.6 percent to $1.2885 per euro at 11:27 a.m. New York time after reaching $1.2877. The greenback fell 0.1 percent to 78.23 yen.
The Dollar Index has fallen the last two months and is on pace to decline in October. German Chancellor Angela Merkel traveled to Athens today to promote austerity and encourage Greece to stay in the euro.
“It’s a good short-term and long-term play,” Taylor said of the dollar in an interview on Bloomberg Television’s “In the Loop” with Deirdre Bolton. “The U.S. economy is looking much better than the other economies of the world. Europe has a possibility of a bad nick with the Greek situation.”
Countries such as Australia, which rely on China for export demand, may struggle as the dollar appreciates, Taylor said. Slowing Chinese growth is more likely to be driven by internal demand going forward, making the country less reliant on imports, he said. China is Australia’s biggest trade partner.
“The price of its commodities and exports are going down,” Taylor said. “The housing market is overpriced. There are all kinds of problems in Australia.”
The Australian dollar appreciated 0.1 percent to $1.0178 in New York. It was little changed against the yen at 79.62.