USD Outlook: Embrace Pullbacks -

USD Outlook: Let’s start with our historical outlook

Updated March 2023

In the grand scheme of things, it’s important to keep an eye out for signs that the market may have reached its peak. While the current recovery may not be sustainable, it’s not wise to argue against it. The trend is upward, and that’s what matters. The monthly charts also show a bullish trend, indicating that this rally has a strong foundation.

As long as the trend remains positive, the dollar is likely to test 88.00, and if the trend is still strong when it reaches that level, it could potentially exceed 90.00. However, there is a long-term downtrend line on the monthly charts, which may signal the end of the rally at around 91.00-92.00. Ultimately, the trend indicator will be the final call. Market Update Sept 30, 2014

All the above came into play, and all the targets we issued over the years were hit. This is what we had to say from 2021 to 2023

This is an intriguing development as the dollar is expected to mount a multi-month rally that could last well towards the end of 2022 but with a good chance of spreading until Mid 2023.
The dollar has generated a multi-month buy signal. Until 97.05 is taken out, the action will remain volatile. Hence, aggressive traders that play futures or currencies should view all pullbacks through a bullish lens. Market Update Oct 16, 2021
The dollar has fulfilled its primary objective, but it is still expected to rally until 2023. It is trading in the insanely overbought ranges on the weekly charts, so it’s ripe for consolidation. A weekly break below 105.90 will push into a corrective mode that can last several weeks. It is expected to test the 111 ranges and possibly trade as high as 114 before putting in a multi-year to multi-decade top. Market update July 24, 2022
The dollar is still expected to rally to new highs before putting a multi-month to multi-year top (which could morph into a nine to 11-year top). There are two things to keep in mind. From a risk-to-reward ratio, the juicy part of this trade is over. Secondly, this last phase is the tail end part of the move. 10% of the time, it fails to manifest, as was the case with major indices in 2022. In intensity, it is almost as strong as the first part of a bull move. Market Update Jan 30, 2023

Dollar outlook Aug 2018

The outlook for the US dollar index appears positive, indicating a strong possibility of the US dollar outperforming other major currencies. In the event of a trade war between the Trump administration and the EU, the Euro may trade on par with the dollar. The Fed is well-positioned to tackle the next stage of the currency wars. By raising interest rates early in the cycle, the Fed can easily lower them in the future if necessary. Countries that try to match US interest rates risk rapid currency devaluation, leading to high inflation.

The US has various tools to counteract any nation that decides to engage with it. It is expected that Europe will work with the US, which would enable both nations to put pressure on China to come to the negotiating table. This move could trigger a positive change in China, similar to what happened in Taiwan when it broke away from mainland China. In conclusion, the US dollar index chart is currently bullish, and the multi-year bull market for the US dollar is still intact.

USD Outlook: Historical View (2015)

The potential for a correction in the dollar is present, as a close below 82.80 for more than 3 consecutive days could lead to a test of the 81.80-82.20 support levels. The custom MACD indicator is crucial to identify the correction’s momentum, and the green line crossing over the purple line would signal a more substantial correction. The SD MACDS can provide further insight into the correction’s strength, with a negative turn indicated by red dots below the lower SD band. Nevertheless, as long as the trend remains positive, every significant pullback should be viewed as a buying opportunity. Both versions of the MACD and the custom RSI indicator are currently in bullish mode. Tactical Investor March 2015

Conclusion

The dollar appears to have already put in or is close to putting in a secondary bottom. The resulting rally is expected to reach a multi-year peak that may last a decade. This final rally phase, referred to as the tail end of the move, fails to materialise 10% of the time, as was seen with major indices in 2022. In intensity, it’s almost as strong as the initial part of a bullish move. Market Update March 7, 2023

USD outlook: General reasons for the dollar rise

From 2014 onwards, the US dollar started to gain strength against major currencies like the Euro, British Pound, and Japanese Yen. Several factors contributed to the power of the USD during this period, including:

Improving the US economy: The US economy was showing signs of improvement, with more vigorous growth, lower unemployment rates, and a recovering housing market. This made the USD more attractive to investors.
Rising interest rates: The Federal Reserve started raising interest rates in 2015, making the USD more attractive to investors seeking higher yields.
Political uncertainty in Europe: The Eurozone faced political uncertainty and economic challenges during this period, making the USD a more attractive currency.
Strong demand for safe-haven assets: The USD is considered a safe-haven currency during times of global economic uncertainty, and there were several events during this period drove investors to seek safety in the USD, including the Brexit vote and the US-China trade war.