Friday's plunge through the red line (p=103.60) means the Dollar Index will fall to at least 102.40 before it can attempt to find traction. That would put it even with an important low recorded last March, but any further slippage, especially if sharp, would be signaling a plunge toward the 100.62 low notched in the final days of 2023. Here's a longer-term chart, however, that shows a path all the way down to 93.78. That nearly unthinkable target is precisely confirmed by the bounce off p=100.57, and its attainment would become an odds-on bet if DXY closes for two consecutive weeks below p. _______ UPDATE (Aug 9, 2:02 p.m.): The dollar has bounced modestly from 102.16, just 24 cents below the minimum downside target given above. When the rally fails as I expect it to, look for more weakness into the range 99.58-100.57, between two key lows on the daily chart that occurred, respectively, on July 19 and December 28. ______ UPDATE (Aug 16): As anticipated above, the dollar has turned lower yet again, presumably bound for the 99.58-100.57 range noted. If you trade off this vehicle, please note that DXY will have a chance to bounce from exactly 101.26, a Hidden Pivot derived from the 240-minute chart, where A= 104.45 on 8/1.
The dollar got hit hard on Thursday, but the weekly chart shown in the thumbnail inset puts it in perspective. DXY has been scuddling sideways since December, and there is scant evidence it will break out of the approximately five-point range in which it has spent most of 2024. It would pick up voodoo-number support 90 cents below, at 103.18, but sellers would have to pound it through p=100.57 to create even a hint of trouble. Regardless, D=93.78 is theoretically in play, so we should keep close track of lesser abcd patterns to determine which way the wind is blowing. _______ UPDATE (July 28): Zzzzzzzzzzzzzzzz.
Last week's descent to the green line (x=105.03) has triggered a 'mechanical' buy there that rates a 6.4 on a 1 to 10 scale. That means the trade looks moderately appealing and has an approximately 64% chance of rallying to at least p=106.07 before DXY could dip below C=103.99, stopping out the pattern. A return to p would not necessarily be the end of the bull cycle begun from 100.62 last December, but the dollar could still spend months in tedium with little progress in either direction.
Although this week's commentary discusses why the dollar's weekly chart looks interesting, the daily chart shown is equally interesting in another way. DXY spent most of the week stalled precisely at the 106.07 midpoint Hidden Pivot resistance of a bullish pattern that projects to as high as 108.15. The way in which buyers handle this obstacle cannot but accurately predict the dollar's course over the next several weeks. In any event, and however unlikely, a swoon to the green line (x=105.03) would trigger an enticing 'mechanical' buy.
Bearishness on the U.S. dollar reached a shrill crescendo last week after the Saudis began accepting other currencies for oil. Some seem to think this will move the world away from the dollar as the global reserve standard, but I strongly disagree. The dollar's indispensability for propagating a $2 quadrillion derivatives shell game is far more crucial to its supreme status in the world's heavily financialized economy. Crude oil is certainly a large market, but it is puny in comparison to the nominal value of derivatives traded digitally around the world. The chart shows the dollar ensconced in the upper range of a wedge formation, An upside breakout without a cyclical correction down to the lower line would be very bullish, however illogical it might seem to dollar bears (aka 'inflationists'). When the breakout occurs, it will leave the punditry, eggheads and bloviators who would consign the dollar to ignominy with some serious explaining to do. Suck it up, dudes!
The long-term picture shows the dollar's three-year-old bull market to be mildly resurgent. Although the most recent rally failed to punch past October 6's 107.35 peak, the move to p2=106.44 was sufficient to keep the chart constructive. Specifically, DXY would become an appealing 'mechanical' buy if it comes down to the green line (x=102.56). Thereupon, a one-level move back to at least p=104.50 would be more or less assured, even if further upside to p2, or to D=108.38, would probably be no better than an even bet.
The previous tout suggested the dollar could range-trade for a long time between 100 and 110. However, if it merely pushes above the 107.99 'external' peak shown in the chart, that would command our attention and respect. It would also be something to fear, since a resurgent dollar would put the global economy back on a path to the deflationary bust I've predicted for many years. A rally piercing the 107.99 resistance would be all but certain to hit p=109.66, providing a test of the most important resistance the Dollar Index has faced in years.
Although my deflationist outlook has kept me bullish on the dollar for decades, the two charts shown in the inset suggest that the greenback's implied surge to punitive heights - for debtors -- lies well down the road. It also seems doubtful that this will occur simultaneously with a leap in rates on the 10-Year Note, since they could not likely exceed the 5% heights achieved last October without sending the global economy into a tailspin. More likely is that the dollar will strengthen with real rates falling. For now, though, expect DXY to continue scuddling sideways between 100 and 110.
A 'mechanical' buy at the green line returned a theoretical profit on Friday when the dollar jumped to the red line (p=204.50). This is of no trading consequence, since we don't actually take positions in this vehicle, but it lends a touch of health to the overall appearance of the daily chart. The moderate presumption now is that the rally will continue to at least p2=106.44, and possibly event to D=108.38. Let's see whether bulls can push DXY past the midpoint resistance with vigor, since that would bull up the chart even more.
'Mechanical' buying opportunities are not supposed to feel like opportunities, since the buying often occurs with the trading vehicle falling hard to the green line. The Dollar Index got hit three days in a row last week, sending it plummeting to x=102.56, where a 'mechanical' buy was signaled. Instead of leaping on the trade I'll suggest paper trading it, the better to observe how an unappetizing possibility extricates itself from a bog. For the trade to work, DXY would need to rally to the red line without first dipping below C=100.62. _______ UPDATE (Mar 17): So far, so good: DXY has rallied from the green line and reached the midway point between the line and the midpoint Hidden Pivot at 104.50. At that price, taking a theoretical profit on 50% of the position would be in order.
