lling in order not to incur in losses and try to benefit by buying another currency that’s likely to be more stable. The US and Canadian dollar pair is now probing through resistance levels not seen since October 1998. The recurring theme throughout 2000: "Resistance is futile!"It is interesting to look at how the USD has strengthened since January 2000. The upward trend went from $1.4450 at the end of January to $1.4700 at the end of August, a move of 2 cents over 8 months. The rate of increase accelerated rapidly in the September to November period, from $1.4700 to $1.5550, a move of 8 cents in just 3 months.The penetration of each resistance opened even higher levels of resistance, as the new focus. The all time high of $1.5850 is now in sight, just 3 cents away. It seems that the market really wants to test the high. Expect increased volatility going into year-end at near record levels. Watch for a dramatic correction lower, however, when this trend finally breaks.Chart 1 (below) shows the United States current balance of payments (expressed as a percent of GDP) since 1950. In the early post-war years there was generally a surplus, but since 1982 there has been a deficit that has trended upwards, however with large fluctuations, reaching a post-war record of 3.6% of GDP in the third quarter of 1999. Net property income from abroad has fallen from about 1% of GDP (positive) in the early 1980s to a small negative in 1999.Chart1The U.S. Current Account and Related Series (Percentages of GDP) Source: CitibaseThe current account deficit has generated a large and growing debt owed by the United States to foreigners, which some people prefer to call the United States negative net asset position (NNAP). As we can see in chart number 2 below, the NNAP reached about -17 % of GDP in the middle of 1999. With the current account deficit running at nearly 4 % of GDP and a further rise in stock prices. The NNAP will probably reach -20 % of...
