The U.S. Dollar Index may have started a new medium-term cycle in August, and if so, it could be quite bullish and in a position to rally for many more weeks (even months). But this index could also be right at the end of an older medium-term cycle and ready to move sharply down to its final cycle bottom. Because that bottom is due anytime over the next three weeks, we will soon know which cycle (old or new) is correct. We are now in a reversal zone specifically for currencies (Sept. 20 - 28). A high formed yesterday at 93.45. That could be a top, or we could get a higher one anytime through next Tuesday followed by some sort of correction. Any corrective drop would likely push precious metal prices higher.
Our longer-term view of the U.S. Dollar is still uncertain. As I have discussed before, Democrat presidential administrations are statistically usually correlated with a rising dollar. But there is a strong possibility that a 16.5 year long-term cycle in the dollar started in 2008 and is now coming to an end. The top to this cycle was actually a "double-top" at 103.82 in Jan. 2017 and 102.99 in March of 2020. The U.S. Dollar Index has fallen steeply from there, and the 16.5 year cycle is due to bottom sometime in late 2024 or early 2025. But it is possible that the current Democrat administration could throw this cycle off. The dollar has been rallying since the start of the new year (and new administration). If the greenback can continue to rally and it breaks above that double-top (103.82), then we will have to assume the 16.5 year cycle has been distorted or truncated. But that top is far away from the dollar's current value (93), and there is still plenty of time for the greenback to turn back down and resume its fall to the final 16.5 year cycle bottom in 2024-2025. Three possible downside targets for this bottom would be around 87, 78, or even as low as 54. There are three years left in the strongly Democrat Biden Administration. Will this be enough time to push the U.S. Dollar to new highs (above 104)? In the equity "crash" of 2008-2009, investors fled to the greenback as a safe haven. If the broad stock market experiences another severe correction soon (as we are expecting), will investors do the same thing? It is a possibility. We shall have to wait and see.
Crude oil started a new medium-term cycle on Aug, 23 with its low at $61.11 (Dec. contract chart), and prices have risen sharply from there. We are expecting a sub-cycle top and a modest correction in this market sometime over the next few weeks. We will wait for that correction as a possible opportunity to buy as this market looks quite bullish at the moment. Staying on the sidelines of crude oil for now.