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Will the US Economy Fall Alone?

US existing home sales were a huge disappointment – dropped by 28% to a rate of 3.83 million. But instead of risk aversion that was seen lately, the markets acted differently, with the dollar collapsing together with stock market. Is the US decoupling from the world?

Everybody knew that the housing sector couldn’t really stand on its own two feet – sales were very dependent on government aid. But nobody expected this sharp and devastating fall. The release of the figure came out when US stock markets were open, and sent stock indices plunging. In recent weeks, we’ve seen this behavior go hand in hand with a stronger dollar, especially in the main vehicle – EUR/USD. This time was different:

EUR/USD, that fell at the beginning of the week and struggled with the 1.2610 support line for many hours, leaped to 1.27 in a short period of time, and left stopped short of the 1.2722 resistance line. Also other currencies gained against the US dollar. This “normal” behavior replaced risk aversive behavior.

The United States has the biggest economy in the world, and it’s considered the locomotive, either in growth or in contraction. Is the world changing? Will the US plunge into a double dip recession alone? Will other countries maintain stability while the superpower goes down under?

There are already talks about the US being bankrupt, but these were dismissed. Also the talks about a new world reserve currency that will replace the greenback were forgotten, especially after the European debt issues erupted.

But with China emerging as a superpower – already the second largest economy in the world, things may be starting to change.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.