IMPORTANT UPDATE ON THE U.S. DOLLAR (6:00 pm EDST)
The U.S. Dollar Index may be approaching a significant turning point right now in its long-term 15-16 year cycle. As I've mentioned in previous blogs, this cycle began with the low of 70.69 in March 2008. From there it rose bullishly to 103.82 in Jan. 2017 and to 102.99 in March 2020. These two high points likely represent the final "double-top" to the 15-16 year cycle which would mean that the U.S. dollar is now in the process of falling to its final 15-16 year cycle low. We are 14 years into this 15-16 year cycle, so it is clear that the bottom is due soon. If this analysis is correct, we should expect a bottom that could end up in the 55 - 60 range sometime between 2023 - 2025. (Yes, long-term cycle corrections are usually quite steep - especially if the cycle has been bullish, as this one has.)
There is an interesting twist, however, to this current 15-16 year cycle in the U.S. dollar. Some financial analysts have noted for many years a strong correlation between a rising or falling dollar and which political party, Democrat or Republican is occupying the White House. It seems that under a Democrat administration, the dollar usually rises into its 15-16 year cycle crest, and under a Republican administration it usually falls into its 15-16 year cycle low. (This is not a political statement but simply an observation of the data). The problem here is that it is still early in the current Democrat administration, so the dollar should be rising to its 15-16 year crest. But as I stated in the first paragraph above, the current cycle pattern strongly suggests the long-term cycle crest is in, and that the dollar is now falling to its final long-term cycle bottom.
So which scenario is correct? Well, the dollar has been rising steadily since the 2020 election, so it would appear that the political cycle is manifesting and playing out (so far). For this to be confirmed, however, the U.S. Dollar Index would have to break clearly above those double-top highs from 2017 and 2020 (i.e above 104). Yesterday (Friday) the dollar broke briefly above 100 and closed the day at 99.80. We are thus getting close to that double-top. But the current medium-term cycle (not the long-term cycle) is also very old and due for its final correction anytime now. We are in a general reversal zone, and we enter another reversal zone specifically for currencies next week (April 12 - 20). A significant top could be forming now, and a major correction could follow that might get us back on track with the idea of the U.S. Dollar falling to its long-term (15-16 year) cycle bottom due in 2023 - 2025 (despite the presence of a Democrat administration).
It will be interesting to see which cycle (the regular 15-16 year cycle or the political cycle) prevails here. The current rise in the U.S. Dollar Index seems to contradict current rising inflation, but fears of a crash in equity markets could be driving investors into the greenback as a safe haven hedge, just as it did during the 2008-2009 "crash". We will keep a close eye on that 104 level for the rest of this year. If the U.S. dollar can't break above there, and especially if it starts closing below 88, we will stay with the idea of a bearish dollar falling into the 55 - 60 range into 2023 - 2025.
The U.S. Dollar Index may be approaching a significant turning point right now in its long-term 15-16 year cycle. As I've mentioned in previous blogs, this cycle began with the low of 70.69 in March 2008. From there it rose bullishly to 103.82 in Jan. 2017 and to 102.99 in March 2020. These two high points likely represent the final "double-top" to the 15-16 year cycle which would mean that the U.S. dollar is now in the process of falling to its final 15-16 year cycle low. We are 14 years into this 15-16 year cycle, so it is clear that the bottom is due soon. If this analysis is correct, we should expect a bottom that could end up in the 55 - 60 range sometime between 2023 - 2025. (Yes, long-term cycle corrections are usually quite steep - especially if the cycle has been bullish, as this one has.)
There is an interesting twist, however, to this current 15-16 year cycle in the U.S. dollar. Some financial analysts have noted for many years a strong correlation between a rising or falling dollar and which political party, Democrat or Republican is occupying the White House. It seems that under a Democrat administration, the dollar usually rises into its 15-16 year cycle crest, and under a Republican administration it usually falls into its 15-16 year cycle low. (This is not a political statement but simply an observation of the data). The problem here is that it is still early in the current Democrat administration, so the dollar should be rising to its 15-16 year crest. But as I stated in the first paragraph above, the current cycle pattern strongly suggests the long-term cycle crest is in, and that the dollar is now falling to its final long-term cycle bottom.
So which scenario is correct? Well, the dollar has been rising steadily since the 2020 election, so it would appear that the political cycle is manifesting and playing out (so far). For this to be confirmed, however, the U.S. Dollar Index would have to break clearly above those double-top highs from 2017 and 2020 (i.e above 104). Yesterday (Friday) the dollar broke briefly above 100 and closed the day at 99.80. We are thus getting close to that double-top. But the current medium-term cycle (not the long-term cycle) is also very old and due for its final correction anytime now. We are in a general reversal zone, and we enter another reversal zone specifically for currencies next week (April 12 - 20). A significant top could be forming now, and a major correction could follow that might get us back on track with the idea of the U.S. Dollar falling to its long-term (15-16 year) cycle bottom due in 2023 - 2025 (despite the presence of a Democrat administration).
It will be interesting to see which cycle (the regular 15-16 year cycle or the political cycle) prevails here. The current rise in the U.S. Dollar Index seems to contradict current rising inflation, but fears of a crash in equity markets could be driving investors into the greenback as a safe haven hedge, just as it did during the 2008-2009 "crash". We will keep a close eye on that 104 level for the rest of this year. If the U.S. dollar can't break above there, and especially if it starts closing below 88, we will stay with the idea of a bearish dollar falling into the 55 - 60 range into 2023 - 2025.
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