We are at an important turning point in our analysis of the U.S. Dollar Index. Please refer to my blog post from earlier this month (April 9) on the U.S. Dollar.
Today the U.S. dollar is testing and challenging it's two "double-top" highs (103.82 from Jan. 2017 and 102.99 from March 2020). It rose to 103.28 earlier today, and is closing a bit below 103. As I explained in my April 9 blog, those two earlier highs could have been the final tops to a long-term 15-16 year cycle in the dollar that started with the low of 70.69 on March 2008. Today's high may be creating a "triple-top" to this cycle. If so, the dollar is ready to take a very steep fall to the final cycle bottom which is due anytime over the next two years (we are 14 years from that 2008 low).
But as I mentioned in my April 9 blog, there's also the possibility that the greenback is not following a normal 15-16 year cycle and is instead following a "political cycle" related to which political party is currently in the U.S. White House. The dollar tends to rise during a Democrat administration, and indeed, it has been rising sharply since Jan. 2021. It's still possible an older "normal" cycle is in place and is ready to fall from this "triple-top". However, if this index breaks clearly above $104 and continues to rise, we may have to assume the political cycle is taking over, and we will have to relabel the cycle as a younger, bullish one.
Although a bullish dollar seems to contradict current inflation, the dollar may be viewed right now as a "safe haven" from a potential stock market crash (as it was in 2008-2009). As I wrote in my April 9 blog:
"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."
Let's keep our eyes on that 104 level.