1. Dollar vs. Euro Kaitlin Briscoe Doug Durkalski Allison Gott Jen Hooks

2. Fundamental Analysis  Dollar will hit a low around $1.40/€ in mid- 2005  The equilibrium rate is around $1.15/€  What will cause the dollar to appreciate?

3. In the U.S…. Capital investment will grow at 3.25% per year, fueling economic/GDP growth Capital investment will grow at 3.25% per year, fueling economic/GDP growth Imbalances in the U.S. current account and households’ propensity to save/spend will have to be corrected Imbalances in the U.S. current account and households’ propensity to save/spend will have to be corrected Consumer inflation will fall with declining oil prices (<$40) and recovery in the labor market Consumer inflation will fall with declining oil prices (<$40) and recovery in the labor market Moderate stance toward active monetary policy may be modified if decline in dollar persists Moderate stance toward active monetary policy may be modified if decline in dollar persists Bottom Line: The dollar will turn around relative to the Euro in the second half of 2005. Bottom Line: The dollar will turn around relative to the Euro in the second half of 2005.

4. U.S. Deficit  Export demand unlikely to correct current account deficit on its own…  Central banks will have to get involved and “support” the dollar through purchases!  The worse it gets, the harder it is to correct…  **Concern over extreme decline in dollar halting worldwide economic expansion should provoke central banks to buy (or hold) dollar positions!

5. In Europe…  Economic growth will improve in the second half of the year due to lower oil prices and falling $/€ exchange rate  However, first half of 2005 will not trigger increased demand for U.S. goods  Rising interest rates in U.S. and stagnant rates in Europe should improve the imbalance in the exchange rate

6. Technical Analysis

7. 1 Year Movement

8. 2 Week Movement     

9. Moving Averages

10. Other technical indicators…  Relative Strength Indicator (around 70) indicates a bearish outlook for the dollar (although this indicator’s relevance rarely lasts over a week)  Fast Stochastic (around.8) implies that the dollar is currently near an annual high and should be sold