How You Can Trade The Falling US Dollar

The US Dollar Index has fallen 7% in the last 10 days - a big move for the slow moving index. The 2.9% drop in the index on Wednesday was one of the biggest one-day losses in a long time. The printing press in DC and the news from the Fed will lower the purchasing power of the US Dollar and thus the value of the greenback. Technically the US Dollar Index broke its long-term downtrend in 2008, but recently ran into a significant resistance area between 88 and 90. Today the index is trading at 83 with the next support level at 81, followed by 78.

If you believe the US Dollar will struggle in the year ahead there are a number of options available to investors. But before naming a few or the investments, realize there could be a short-term bounce in the greenback before the next down move begins. If this occurs as I expect it will - it will then be time to begin shifting money into the short dollar investments.

As the US Dollar falls, other foreign currencies around the globe will benefit. One could open a currency trading account or simply use currency ETFs to gain exposure to foreign currencies. The Rydex CurrencyShares Euro ETF (FXE) rallied 9% in two weeks off the early March low as the US Dollar tumbled. Most major currencies are covered by an ETF. Precious Metals also tend to do well when the US Dollar falls. The move in the gold and silver ETFs this week was based on the fall in the greenback.

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