The 96.36 downside target we've been using remains viable. The current, countertrend move would need to surpass the 'external' peak at 100.54 recorded on May 29 to imply the long-term downtrend may be about to change. Even then, that would generate a 'mechanical' sell signal that we would likely ignore. More immediately, anything above 99.39 early in the week would be a faintly bullish sign.
Sloppy action since mid-May has transformed a slightly promising picture for the dollar into a sorry mess. The bearish pattern shown has already signaled a profitable 'mechanical' short at the green line (x=100.58), and there's no reason it will not continue to dominate DXY until the 96.36 target is reached. The pattern is sufficiently clear and compelling to suggest that a tradable bounce from 'D' is likely, but if not much of a bounce materializes, it'll be time for Katie to bar the door.
If DXY is going to resume the uptrend begun in April from 98.01, the 98.66 Hidden Pivot support shown would be a logical place for this to occur. The pattern is a conventional one, but because the 'B' low is not obvious, its gnarliness should work for us, delivering a tradable bottom precisely where expected. We don't typically trade this vehicle, but a reversal from the target could yield opportunity in currency pairs or futures. ______ UPDATE (May 30): Easy come, easy go. What started out as a promising week ended with a steep, one-day reversal that left the dollar little changed from the previous week's lows. Still worse is that the apex of the rally failed to generate an impulse leg on the hourly chart by surpassing an external' peak at 110.58 recorded May 19 on the way down.
The dollar's unaccustomed burst of strength last week actually generated some hubris, along with speculation that the bear market begun in late 2022 might be over. Although it's too early to be confident about this, the possibility warrants our attention. The move so far tripped a theoretical buy signal at x=100.43, the green line. It's a strong bet that the uptrend will continue to p=102.93, the midpoint Hidden Pivot, but we'll be better able to judge its strength and durability once we've seen bulls interact with p. A completed move to d=107.94 wouldn't signal an inevitable end to the dollar's 2.5-year dither, but it would put DXY in good position to break out for a run at 2022's high, 114.78.
A faint glimmer of hope appeared last week with DXY's subtle poke through the 'd' target of a minor reverse pattern. It isn't much to celebrate, but the fact that the rally even made it to 'D' implies something may have changed, since the last time this modest feat succeeded was almost a year ago. To gauge its significance, we'll need to monitor retracement patterns closely, since they should have trouble exceeding p if the dominant trend has in fact changed. The first in evidence, on the 30-minute chart, not only exceeded p, it topped at the 'd' target of a minor rABC on Friday (a=99.70 on 5/1 at 7:30 a.m.).
The Dollar Index triggered a 'mechanical' short when it rallied to the green line as the week began. The signal would rate a 6.0 out of 10, since the low that preceded the rally was distant from our sweet spot, even if it did touch the red line. I am leaning bearish, but if DXY blows past C=100.28 toward the beginning of the week, we should give the move the attention it deserves. The greenback is long overdue for a rally, and there's nothing to say it can't start here. Worst case for the near term is 95.79, the 'D' target of the pattern shown.
The Dollar Index has broken down with last week's penetration of a key low at 99.58 that was recorded in July 2023. Expect more weakness down to the green line (x=96.03), at least, before the greenback can turn around. A dip to the line would trigger a 'mechanical' buy predicated on a climactic run-up to the 119.37 target. That seems farfetched at the moment, but there is nothing in the chart to suggest the long-term uptrend is over. At the green line, the correction will amount to about 16% from the September 2022 high at 114.78. _______ UPDATE (Apr 21, 4:15 p.m. EDT): Today's penetration of a 98.04 midpoint Hidden Pivot support was not decisive, but any more weakness will clear a path down to D=95.79 of this pattern. As things stand, a rally to the green line (x=99.16) already would trigger an enticing 'mechanical' short that would take a stop-loss at 100.29.
Time for a tone change. This is a tough call, since I've been a hard-core deflationist since the mid-1970s after reading a persuasive book by the late C.V. Myers, and later another, The Great Reckoning, by James Dale Davidson and Lord William Rees-Mogg. Myers' thesis was that the endgame for the epic credit blowout of the last 40 years would feature a dollar so strong that all who owed them would be crushed by imploding debt. The implied tsunami of bankruptcies would be even more devastating than the 1930s experience, wiping a dozen zeroes from the global balance sheet. The resulting shortage of dollars would become the catalyst for a Second Great Depression from which it would take a generation or longer to emerge. I still believe this is how things must end. But not now. Trump, who is verging on political omnipotence, clearly favors a weak dollar, and this will hold the coming bust at bay for a while. But the chart suggests the dollar is tough enough to stand up to such moderate debasement as Trump's patriotism and nationalistic pride can abide. I have adjusted my outlook for the dollar accordingly: Look for weakness down to the range 95-100; then, an explosive rally that will end inflation for 60 years. _______ UPDATE (March 14): The Dollar Index has come down hard to the 102.99 'd' support of this pattern. It is sufficiently clear and compelling that we 'should' see a tradable bounce. If there is none, that would darken my outlook significantly. _______ UPDATE (Mar 21): DXY has bounced 2% from within 20 cents of the 102.99 'hidden' support furnished above. The rally would be more persuasive, however, if it exceeds several 'external' peaks ranging from 104.32 to 104.67 recorded in the first week of March. Here's the chart.
Some think the dollar's bull run is over because of Trump, but I doubt it. Trump is viewed by conservatives and libtards alike as the cause of just about everything these days, but let them try to explain why stocks keep going up even though everyone is so upset about his tariffs. A strong dollar threatens to crush an era of easy credit and make it painful for all who owe dollars to pay them back. The dollar's main source of strength is that the world simply cannot afford for the dollar to keep rising. It will undo all the assumptions that have made the 'wealth effect' the most popular invention in the history of civilization. From a technical standpoint, the Dollar Index is in a so-far moderate correction from mid-January's 110.18 high. I expect it to come down to at least 105.99, but we should see a strong bounce from that number, a midpoint Hidden Pivot, if new highs are coming. Alternatively, an easy breach of the support would imply more slippage to as low as 101.78.
I shrugged off a remark in the chat room that the Dollar Index did not exactly follow my bullish script last week. I noted at the time that the long-term trend is unambiguously bullish, and that the rally from October's low has been nothing short of spectacular. However, when I looked very closely at the chart while preparing this tout, there were some subtle signs of possible trouble. For one, the most recent rally peak failed to surpass any external peaks. I've circled the closest on the chart, a look-to-the-lefter so subtle that it is not even visible in the SnagIt reproduction. Nevertheless, a basic rule of my system is that healthy rallies must exceed at least one prior peak with each upthrust, and this one didn't. Also, notice that the selloff from last week's 110.18 high triggered a theoretical 'sell' signal when it breached the green line (x=108.08). We should take this seriously because the reverse pattern itself, although highly unorthodox, comprises three 'locked' coordinates whose authority cannot be denied. The implication is that DXY may have begun a fall that could take it all the way down to 101.77. If so, that would be quite bullish for gold.
