DXY

The U.S. dollar has been slow to challenge the 97.87 peak from last June (see inset), even if its buoyancy has gone more or less according to our forecast. Our long-term outlook for the greenback remains very bullish -- so bullish, in fact, that we see the uptrend culminating in a short squeeze that wrecks the global financial system and reduces most commerce to a state of barter.  The initial phase of this scenario would feature a rally in the Dollar Index that tests and then breaches highs near 120 recorded nearly two decades ago. Well before then, however, every profligate dollar-borrower on earth -- you know who you are -- would be crushed by the burden of having to pay off debts in a super-hard currency. The list of potential losers stretches on and would include, for one, virtually all of the players in a derivatives markets currently valued at more than a quadrillion dollars. You should view every dime of this as 'unactualized' deflation in order to understand why the puny central central banks are powerless to prevent it. Not that they would even try. For, any attempt by the banksters to monetize this black hole of debt when it begins to implode would be tantamount to hyperinflating. And that would be worse than doing nothing at all.  When the crisis hits, perhaps with a few banks failing to open some Monday morning, it will be impossible to roll short-term loans. This will force debtors to settle up in cash, creating a desperate need for dollars. The resulting short squeeze is why deflation rather than hyperinflation is the more likely of the two scenarios to produce a financial day of reckoning. Bicycling to Soup Kitchens In a debt deflation those who owe would be liquidated into bankruptcy, pushing

Today's downdraft breached a 95.68 support that I'd said in December was crucial to the bullish look of the dollar's lesser charts.  This warrants caution even though the longer-term charts remain bullish, albeit no longer unambiguously so. Assuming the current wave of selling takes out p2 support at 95.23, look for more slippage to at least 94.75, the pattern's D target.  We'll reevaluate the trend if D gives way easily as well, but it looks likely to produce a tradeable bounce in any event. _______ UPDATE (Feb 7, 10:52 p.m. ET): Buyers recouped their mojo, pushing DXY to within a penny of Jan 24's peak at 96.68. A move above it would generate a robust impulse leg on the hourly chart. _______ UPDATE (Feb 12, 7:53 p.m.): The dollar sold off hard after topping in the middle of the night. However, it did so after generating a very robust impulse leg on the hourly chart, implying the current weakness is merely corrective.

The Dollar Index has been in a bullish holding pattern for two months. As tedious as this has seemed, it has not diminished the likelihood that the next big move will be up. My immediate target would be 98.20, and we could infer the rally had begun in earnest once DXY has closed for two consecutive days above the 97.10 midpoint resistance shown here.  Alternatively, the first hint of trouble -- unlikely in my estimation -- would come on a print beneath the 95.68 'external' low shown in the inset. A further, significant strengthening in the dollar will tell us when the deflationary endgame for the global economy is gathering force. It will crush debtors, bankrupt creditors and lop at least four or five zeroes worth of funny money from the banking system's quadrillion-dollar shell-game. I have written extensively on why hyperinflation is extremely unlikely to settle debts that have become vastly too large to repay. If you cannot understand why, let me pose this question: Do you actually believe the banksters will let you pay off your mortgage with a few hundred-thousand-dollar bills that you've peeled from your wallet? If you answered in the negative, you are implicitly a deflationist. Regarding hyperinflation, if you think the ruinous Weimar episode of 1921-23 shows that it could happen in the U.S., the opposite is true.  Read Adam Fergusson's When Money Dies for pellucid insights as to why. It is $8 on Amazon.

I tend to tune out head-and-shoulder patterns because they are everywhere one wishes to see them. However, the one shown in the inset is an impressive specimen and dangerous to ignore. Since it implies an eventual fall in the Dollar Index to as low as the high 80s, I'll need to factor that possibility into an otherwise resolutely bullish outlook that has obtained here for several years. Charts aside, I've been bullish on the dollar because, despite talk of the world ganging up on it to create an alternative reserve currency, no other money on Earth is sufficiently scaleable to fill the bill. The U.S. dollar is the only game in down, and that's why I'll take the bearish H&S pattern with a grain of salt. Additionally I'll note that the weekly chart is tracing out a much bigger H&S pattern that goes back to 2014. If it were to play out in textbook fashion the dollar could be headed into a major bear market that would it down into the high 70s._______ UPDATE (Oct 23, 11:04 p.m. EDT): If bulls can push this vehicle just 1.75 to 2.00 points higher, it would negate the bearish head-and-shoulders pattern noted above._______ UPDATE (October 25, 9:38 p.m.): This chart shows how the last few days have all but negated the bearish head-and-shoulders pattern that had been forming since May. It suggests that the 98.99 target that was in play in June is still very much in play.

The Dollar Index, currently trading for around 95, is poised for a breakout that seems likely to hit the century mark within the next 12-24 months if not sooner. This is going to put added pressure on foreign earnings of U.S. multinationals as well as increasing the already ponderous weight on bullion. My long-term forecast for the Dollar Index calls for a test of highs near 120 that were made more than 17 years ago. If so, the implication is that February’s 88.25 low marked the beginning of a monster rally like the one that took DXY from 79 to 100 in 2014-15.  There’s no way the dollar could reach 120 in a normal economy. The forecast implies that at some point, the U.S. will experience a catastrophic deflation that makes dollars scarce. A wave of bankruptcies could cause this, and the most logical place for it to start would be in the collapse of a public-employee pension system that is already a sinkhole waiting to happen. This is a liability that cannot be monetized — at least not without touching off hyperinflation. For reasons that I have written about for more than a decade, it is all but certain to occur. For further discussion of this, click here to access an interview I did on Wednesday with Cory Fleck of Korelin Economics Report and National Investors' Chris Temple. _______ UPDATE (August 21, 5:25 p.m.): The dollar has gotten sacked recently, but it would trigger a theoretical 'mechanical' buy signal if the weakness continues to x=94.64, shown as a green line in this chart.  A 93.18 stop-loss would obtain. _______ UPDATE (August 27, 9:33 p.m.): Gold bulls beware: DXY has tripped the 'mechanical' but signal flagged in my update from a week ago. _______ UPDATE (Sep 15):  The dollar rallied

The U.S. Dollar Index has perked up, generating the first impulse leg of daily-chart degree in more than four months. The rally would look even more impressive if it exceeds Monday's 90.99 high by just two ticks, surpassing an additional peak on the daily chart that was recorded back in mid-January. It's too early to get excited, however, since the uptrend has barely created a blip on the long-term charts. That's the chart I've displayed for today in order to keep things in perspective. If you're looking for the move that would break the back of the bear market begun in January 2017 from 103.82, set the bar at 97.87, where a small but technically important 'external' peak was made ten months ago on the way down. Regardless, we can put our doubts aside as long as we remain focused on the hourly chart. At that level, DXY's upward spasm looks mildly impulsive and even encouraging. If the dollar is in fact embarking on a major rally, everything is about to change -- and I mean everything. A strong dollar would surely flatten exports, raising trade-war paranoia to a shrill crescendo. But the main effect would be deflationary in that it would tighten the noose around the throats of all who owe dollars.  Could the stock market move higher in such an environment?  Stranger things have happened, but it seems most improbable.________ UPDATE (May 1, 10:15 p.m. EDT):  The Dollar Index is just shy of breaking out above an important 'external' peak at 92.64. A rally exceeding this peak, which was recorded in January ahead of a steep decline, would create a robust new impulse leg of daily-chart degree. It would also shorten the odds that any weakness in the dollar thereafter would be bullishly corrective rather than a resumption

The bullish case has dimmed somewhat over the last few days, since DXY has begun to roll down without having exceeded the 'external' peak at 91.00 that I've labeled in the chart.  The intraday charts are another story and remain bullish, but a push above 91.00 would have made the bullish story far more compelling. On the 20-minute chart, DXY need only rally above 89.89 to somewhat revive the dollar's spirits. In any event, and as always, we'll look for the upturn on charts of smaller degree before we wax bullish again._______ UPDATE (Feb 14, 6:33 p.m. EST): The dollar got crushed after traders reconsidered their earlier reaction to a CPI number that was worse than had been expected. Now, if DXY falls beneath the Jan 26 low at 88.44, it would put an 86.27 target in play. _______ UPDATE (Feb 18, 5:07 p.m.): The marginal new low at 88.25 recorded Friday was just 0.04 beneath my original target at 88.29 and will have no significant impact on the dollar's bullish prospects as described above. However, if DXY were to close beneath 88.29 for two consecutive days, that would suggest another bout of weakness is coming. Any rally will be just pussyfooting, though, unless this vehicle can pop above the 91.00 peak labeled in the chart. _______  UPDATE (March 4, 5:08 p.m.):  The Dollar Index has traded as high as 90.93 -- close to my benchmark, but no cigar.  However, that peak generated a bullish impulse leg on the daily chart, raising the odds that the next push will exceed the bullish trigger point at 91.00.  ________ UPDATE (March 14, 12:13 a.m. EDT): Today's weakness broke a key Hidden Pivot support at p=89.68. The implication is that DXY will now fall to at least 88.99, the 'D' target associated with

The  Dollar Index is closing fast on an 88.29 downside target that was first signaled back in November. I drum-rolled this 'Hidden Pivot support' a week ago at FXStreet.com because the site's many followers are undoubtedly eager for a USD forecast that is clear, confident and precise.  In this case the target is especially important, since the bearish pattern that produced it is such a textbook beauty.  What this means is that we will be able to accurately assess the dollar's health based on the way DXY interacts with 88.29. If it should close below that number for two consecutive days, or trade more than 0.20 points beneath it intraday, that would suggest the dollar's long decline still has a ways to go -- perhaps a considerable ways. How considerable? My new target following a decisive breach of 88.29 would be 82.34 -- a 7.7% fall from current levels. Keep these numbers well in mind, and plan accordingly. _______ UPDATE (Jan 25, 5:17 p.m.): Coy as ever, DXY bounced sharply from a low at 88.44, just 0.15 points from our target, after plummeting earlier in the day. The rally would need to hit 91.01 to imply that a major turnaround had begun. Until that happens, we'll be alert to a possible relapse to the still-viable target at 88.29. Its crucial importance to the intermediate-to-long-term technical picture remains as described above. _______ UPDATE (Jan 31, 5:57 p.m.): The Dollar Index has been thrashing about since bottoming a week ago just 0.15 points from a longstanding target I'd flagged at 88.29.  The chop looks like base-building, but if it proves otherwise and DXY closes for two consecutive weekly bars below 88.29, I'd infer it was on its way down to at least 87.40 over the near-term, or possibly even to the 82.34

The 91.57 downside target we were using for the dollar looked promising as a place for a powerful bounce to occur. Instead, sellers crushed it on Friday, putting in play a significantly lower target at 88.29 that I would rate as almost certain to be reached. If so, it would add 2.9% to the Dollar Index's so far 12.4% decline from the 103.82 high recorded a year ago. It would also undoubtedly quicken the inflation drumbeat we've been hearing recently from the usual, benighted  sources -- i.e., the news media, professional economists and talking heads. I expect my new target, a clear and compelling Hidden Pivot support, to resist sellers for a while, at least. But if it gives way relatively quickly -- and by that I mean within a day or two of first being touched -- I would infer that the U.S. dollar is headed significantly lower. At the same time, we could expect to see the continuation of some big trends, including lower prices for Treasury bond and notes, and higher prices for stocks, crude oil, precious metals and of course bitcoin.