UPDATE ON THE U.S. DOLLAR INDEX (3:30 pm EDT)
It's been a while since I updated the U.S. Dollar Index. The "greenback" may be at a crossroad right now that could determine its longer-term direction. In previous blogs, I described a long-term 14-year cycle in the U.S. Dollar that likely bottomed in Jan. 2021 at 89.20. Using that labeling, we are only 4 years into a new 14-year cycle, which means the cycle is still young and likely bullish over the next several years. If this is the case, the almost two year correction from the 114.78 high in 2022 is nearly over, and the dollar should start rallying again to challenge and probably exceed that high by the end of next year.
But as is often the case, there is an alternative, more bearish view that may be presenting itself right now. It's possible the previous 14 year cycle did not end in Jan. 2021 and expanded to make its final high in 2022 (at 114.78). In this view, the dollar would be very bearish and would be in the process of falling steeply to its final 14-year bottom with a target of 56 - 67 by the end of next year.
Our preferred view is bullish with a younger 14-year cycle about to rally strongly. But the U.S. Dollar Index is now approaching a support area that if broken could make the bearish view much more likely. There is an upward sloping trend line currently around 101.52 that the dollar is testing today. A weekly close below there would not be good. A close below last year's lows of 100.62 (Dec.) and 99.58 (July) would also be bearish, and a clear break below the Jan. 2021 low of 89.20 would confirm the bearish labeling of an older cycle taking a deep correction into next year.
On the bullish side, the greenback is now falling steeply into the center of our current reversal zone, so a strong reversal back up could be imminent. We should also note that another strong general reversal zone is following on the tail of our current one (which ends this Thursday). That next reversal window takes us into the first week of September (Aug. 23 - Sept. 6), so there is plenty of time for a significant bottom to form in this market.
It's been a while since I updated the U.S. Dollar Index. The "greenback" may be at a crossroad right now that could determine its longer-term direction. In previous blogs, I described a long-term 14-year cycle in the U.S. Dollar that likely bottomed in Jan. 2021 at 89.20. Using that labeling, we are only 4 years into a new 14-year cycle, which means the cycle is still young and likely bullish over the next several years. If this is the case, the almost two year correction from the 114.78 high in 2022 is nearly over, and the dollar should start rallying again to challenge and probably exceed that high by the end of next year.
But as is often the case, there is an alternative, more bearish view that may be presenting itself right now. It's possible the previous 14 year cycle did not end in Jan. 2021 and expanded to make its final high in 2022 (at 114.78). In this view, the dollar would be very bearish and would be in the process of falling steeply to its final 14-year bottom with a target of 56 - 67 by the end of next year.
Our preferred view is bullish with a younger 14-year cycle about to rally strongly. But the U.S. Dollar Index is now approaching a support area that if broken could make the bearish view much more likely. There is an upward sloping trend line currently around 101.52 that the dollar is testing today. A weekly close below there would not be good. A close below last year's lows of 100.62 (Dec.) and 99.58 (July) would also be bearish, and a clear break below the Jan. 2021 low of 89.20 would confirm the bearish labeling of an older cycle taking a deep correction into next year.
On the bullish side, the greenback is now falling steeply into the center of our current reversal zone, so a strong reversal back up could be imminent. We should also note that another strong general reversal zone is following on the tail of our current one (which ends this Thursday). That next reversal window takes us into the first week of September (Aug. 23 - Sept. 6), so there is plenty of time for a significant bottom to form in this market.
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