DXY

The Dollar Index last week popped through peaks going back as far as five years, flouting the Fed's doomed efforts to 'manage our expectations'. This is deflation knocking loudly on the door, and as the dollar continues higher it will put increasing pressure on all who owe. (See my commentary above, and click here for a lively, expansive interview at Howe Street.)  In the headline essay, I've used a minor, look-to-the-left peak near 109 to project minimum upside for the next few weeks. However, here's a bigger picture that yields a higher target at 112.14. I expect the dollar eventually to challenge highs near 120 recorded twenty years ago. _______ UPDATE (May 13, 9:57 p.m.): To gauge the strength of the uptrend, here's a lesser chart that shows DXY in an apparent bullish consolidation after hitting a relatively minor rally target. The 112.14 target given above remains viable and is still likely to be reached. _______ UPDATE (May 19, 6:13 p.m.): What a difference a day makes. The sharp dive has transformed a promising technical picture into a question mark. Some will see a head-and-shoulders in the making, but we should give it another day or two before be infer that DXY is about to fall back to 100 in search of support.

We've been using a big-picture rally target at 103.25, but let's start the week with a focus on a more conservative target at 101.97 that looks all but certain to be achieved.  Its main importance lies in its ability to tell us whether the steep uptrend might be losing steam. As always, an easy move through a Hidden Pivot resistance would portend more strength to come. The dollar's rise matters a great deal because it raises the price of oil for most of the world outside the U.S., and because it increases the burden of debt for all who have borrowed dollars. _______ UPDATE (Apr 27, 11:18 p.m.): The dollar has very precisely hit an important target at 103.25 that took four years to achieve, so extra caution is warranted. We'll move to the sidelines for now.

I've been shouting about this for many years, but let me repeat it once again: The last thing the world needs is a strong dollar, since it will lead inexorably toward ruinous deflation.  Over several decades, I've never wavered in my hyper-bullish outlook for the dollar, even amidst current headlines screaming about inflation, and regardless of what most economists were  saying.  That's because I see no resolution for the global debt bubble other than via massive liquidations that would be tantamount to deflation. A stock market bear will be the catalyst, assuming some 'black-swan' asteroid does not hit us first. From a technical standpoint, the dollar index is rallying sharply after the briefest of corrections. That is quite bullish, but even moreso because the recent 99.42 peak whence the correction began had hugely overshot its Hidden Pivot rally target. _______ UPDATE (Apr 7, 12:09 p.m.): This chart, too, should have been included earlier, since it shows a can't-miss minimum rally target at 103.25. It is predicated on an easy move past p2=99.74, but I doubt that will be a problem. ______ UPDATE Apr 13, 11:012 p.m.): Here's a pattern I somehow overlooked that shows why DXY topped exactly where it did. The weakness presumably is corrective, since we have the outstanding target at 103.25 noted above..

The dollar's precise stall at p=93.38 in early April augured a similarly precise one at the 97.54 'D' target of the pattern. This did in fact occur, but the resistance looks like it is about to give way to a renewed surge following a relatively weak correction that lasted just ten days. The picture will become even more bullish if the buying that powered last week's leap takes out the look-to-the-left peak at 97.80 recorded in June 2020, when the dollar's 'Covid' slide was nearing the halfway point. ______ UPDATE (Mar 2, 7:45 p.m.): Today's coy peek-a-boo high at 97.83 exceeded the peak I'd flagged by just three cents, but that's enough to generate an impulse leg on the daily chart. This is exactly what healthy bull markets do: exceed prior peaks with each new upthrust.

I am updating DXY not because it has done anything interesting since November, but just to have the U.S. dollar on my 'new' front page. It has been locked in a consolidation pattern since then, although the year ended with an imminent but not necessarily serious breakdown.  If the correction continues, it will allow me to switch to a more regular pattern instead of the fiercely gnarly one that has informed us the last month or so. Regardless, we can continue to use D=98.00 as a minimum upside objective for the bull cycle begun in May. It is part of a much larger, bull market that started in 2014. _______ UPDATE (Jan 27, 9:04 p.m. ET): The 98.00 target is in-the-bag, so let's shift our sights upward to the 102.83 D target of this reverse pattern. You can use p2=99.43 as a minimum upside objective for the near term. ______ UPDATE (Feb 3, 9:47 p.m.): The dollar has gone into a fake death dive after rallying to within easy distance of the 98.00 target drum-rolled above.  We'll move to the sidelines for now, the better to sleep through the buck's indeterminate funk.

The pattern shown is nutty, but not so nutty that it won't work for getting long 'mechanically' if you choose, or even getting short at D=98.00. I've used it because the more obvious pattern occupying the last four weeks is a little too obvious to be 'our little secret'.  A run-up to 98 is going to create more problems for a bull market that is already years overdue for a devastating correction. It will make overseas profits earned by U.S. multinationals shrink, but it will also tighten the deflationary noose around everyone who owes dollars. This will come as a rude surprise, and ultimately a profound shock, to those who make financial decisions based on what they learn from CNBC, CNN, The Economist, Bloomberg, and the New York POS Times. Rick's Picks readers might not be spared from the ravages of the coming Second Great Depression, but at least they will have seen it coming.

The dollar came down hard on Friday when the egregiously overrated 'Omicron' variant of Covid-19 seemed to provide hope to dollar bears that the U.S economy would soon reverse course and slip into depression. They might get their wish about the depression, since the price of just about everything has risen to levels where most middle class Americans are starting to throttle back on purchases, especially of cars, houses and appliances that are essential to fueling debt-based 'prosperity'. We would still caution against betting on the buck's demise, since it speared the 96.09 midpoint Hidden Pivot resistance of the pattern shown before getting hit by misguided sellers. Why is the dollar strong everywhere but in the U.S.?  Answer: Because stimulus has targeted Joe Sixpack, not just financial assets and real estate.

The pattern shown is gnarly, but Friday's pause precisely at its midpoint Hidden Pivot implies we're on the right track. The entire week was spent head-butting the 95.89 target of a smaller pattern, but the close above it suggests higher prices lie in store. This conclusion would be validated if DXY can close above p=96.09 for two consecutive weeks, or trade 65 or more cents above it intraday. At some point the dollar's universally unexpected strength is going to start hurting U.S.-based multinationals, but not before the chimps decide where they're going to rotate all of the OPM next.

Since January, the dollar has made more headway than anyone might have imagined against the Fed's heroic efforts to trash it.  Even so, the rally has yet to pass a single 'external' peak of significance on the daily chart. The nearest lies at 94.74,  less than a point above, and getting past it will be crucial to the long-term outlook -- not just for the buck, but for gold and silver as well. If and when that happens, it will open a path to at least 98, where another peak recorded 16 months ago will test the rally's mettle.  For now, let's set a screen alert at 94.75 to announce the breakout. It looks likely, though not quite a done deal. _______ UPDATE (Nov 4, 11:42 p.m.): With the dollar about to break out, putting a nasty new squeeze on stubborn bears, let's raise our sights to the 94.86 target shown in this chart. _______ UPDATE (Nov 10, 1:19 a.m.): The rally detumesced after having gone no higher on Friday than 94.60. The 94.86 target remains viable nonetheless as a minimum upside objective for the near term. _______ UPDATE (Nov 11, 9:31 p.m.): If inflation is about to devour us, the dollar doesn't seem to know it. Use the 95.52 target shown in this chart a a minimum upside target for the moment; it is certain to be reached. If the rally impales it, the next 'D' lies at 95.89,  abased on an 'A' low to the left of the one shown. An easy move through it would suggest the inflation-bet unwind is about to come under even greater pressure. ______ UPDATE (Nov 16, 5:47 p.m.): The uptrend poked slightly above 95.89 -- no easy feat, considering it is the 'D' target of two bullish patterns. A two-day close above it