DXY

The chart offers a moderately bullish picture of the dollar, but with one caveat: the impulsive rally last summer to 107.35 just missed exceeding a small but important peak at 107.99 recorded along the dollar's horrific plunge in late 2022/early 2023.  This subtle but significant failure does not preclude the possibility of a further rally to D=108.38.  Actually, it seems entirely likely based on the teasing interaction between buyers and the pattern's 104.50 midpoint resistance. But don't expect the C-D phase of the bull cycle begun in July to play out symmetrically relative to the A-B leg. This means it could take a while longer for the second leg to reach its destination than the 11 weeks required by the first.

For the deepest, most liquid trading vehicle on earth, the dollar has been getting precious little respect. The chart shows how it has been buffeted around, getting sand kicked in its face by the BRICs, Davos, Iran and who-know-who else.  All that aside, the pattern shown has sufficient clarity to tell use whether DXY will remain a 98-pound weakling for yet a while longer, or instead embark on a recovery tour to the 108.38 target of this pattern. If so, a crucial test awaits at 104.50, which is a double resistance, the respective p and D Hidden Pivots of the two charts featured in this tout. _______ UPDATE (Feb 6, 1:05 p.m.): Rallies yesterday and today created two peaks that exceeded the double Hidden Pivot resistance by just a dime. My hunch is that the overshoot, tiny as it was, will suffice to keep the uptrend alive. However, we'll need to see how strong the minor abcd corrective patterns are before we can judge more confidently whether a significant rally is under way. Whatever the case, it would become a 'mechanical' buy on a pullback to x=102.56.

The dollar made yawn-worthy headway last week with a one-day leap for who-knows-what-reason. The single prior peak the move surpassed on the daily chart was an 'internal' rather than the 'external' we require to signal a true impulse leg. The first such 'external' lies at 104.26, and it can serve as our minimum requirement for signaling a move capable of rejuvenating the long-term bull begun in 2011. Even then the rally would be suspect, for it would still fall well shy of the  107.99 'external' high from November 2022 where a bull run crapped out last October. Our skepticism and a high bar are warranted, since the dollar must weather a Treasury auction calendar for 2024 that will require $8.5 trillion of borrowing to finance rollovers and U.S. budget outlays. Please see my current commentary for additional notes on this.

Just a little lower and it will be Katie-bar-the-door time for the buck. Last week's moderate rally pushed DXY out of the red zone, but the trend will have to exceed the 104.26 peak recorded on 12/8 to become a safe bet, if only for a short while. In retrospect, the failure to push above the 107.99 'external' peak recorded last February foreshadowed problems. Bulls turned timid just when they needed an extra inch of push, and that may have sealed the dollar's fate over the intermediate term.

Dollar bulls ceded more ground last week, further thwarting Powell's efforts to raise the cost of dollars so that they are no longer effectively free to speculators and money-changers. DXY's moderate slippage left it somewhat shy of wrecking an incipiently bullish pattern via a dip beneath the point 'C' low; however, the direction and rate of decline were hardly encouraging. The dollar remains on a 'mechanical' buy signal in theory, but the strategy no longer looks likely to produce a winner.  If the plunge takes out C=99.59, we should brace for more slippage into the mid 90s.

This should be interesting, since the Dollar Index has triggered an appealing 'mechanical' buy with its return to the green line earlier this month. A stop-loss at 99.59 would apply, although we won't be trading on the signal.  A sustained rally would end the stock-market rally begun in October, since there is nothing that Wall Street, the banksters and everyone who owes money should fear more than a resurgent dollar. My hunch is that the rally would need to reach p2=109.66 or so before still-dim perceptions of the threat would sharpen. The first to feel the pain would be the growing hoard of motorists whose cars, including a few Bentleys, are slated for repossession. I'm looking for this debtor epiphany to occur simultaneously with MSFT's fall from a 430.58 bull-market target billboarded here earlier.

The Dollar Index tripped a theoretical buy signal on Friday when it slightly exceeded the green line (x=103.57) early in the session. A hypothetical trade would have finished in the red, but we'll await more evidence next week to determine whether the rally has the moxie to reach p=104.82, the midpoint Hidden Pivot resistance. Although we don't actually trade this vehicle, its gyrations inform and influence our outlook for other vehicles, particularly bonds and bullion. Assuming the latter remains strong, it will be interesting to see whether the dollar and gold/silver are able to rise simultaneously. That would be an important tone change -- something we haven't seen before for a prolonged period of time. _______ UPDATE (Dec 8): Nothing dramatic, but the dollar made encouraging progress last week toward the 104.68 midpoint pivot of the pattern shown in this chart. If it reaches it this week, that would generate the first bullish impulse leg we've seen on the daily chart since September. _______ UPDATE (Dec 13, 11:20 p.m.): Nothing cheers the chimps who manage your money like a falling dollar, since a strong one will undo every assumption that has powered global markets and economies (and Globalists!) for as long as anyone can recall. A day of reckoning is coming, so don't expect the dollar to keep falling just because Wall Street and the bozos who invent the news are spinning everything Powell says these days as wildly dovish.   

The dollar has been falling for seven weeks, but a chart stretching back two years shows that the bull market begun at that time still has credibility if no longer youthful vigor. My bull market target remains 124.79, with a lesser objective at 112.14 that can serve as a minimum upside object for 2024.  Notice that just a little more downside to the green line (x=102.95) would trigger a routine 'mechanical' buy.  Thereafter, the anticipated rally to at least p=106.31 would give us an objective way to determine whether the bull is robust enough to reach the targets given above. If this occurs, it would imply that the global financial system is no longer in Kansas. Indeed, deflationary pressure on all who owe dollars would have turned the commercial banking system and the American heartland into a landscape of bankruptcies.

The dollar spent the week recouping half of the previous week's losses. The bounce came, however, from six cents above a 104.79 low that I'd characterized beforehand as the weakest possible correction. Expect a resumption of a powerful bull trend that will take DXY most immediately to 112.14, and thence to 124.79. Both of these Hidden Pivots were identified here last week and remain our price objectives for the intermediate-to-long-term.