Dollar Update & Long Term Trend Projections For The USD
Sol Palha: Financial & Economic Insights Dollar Update & Long Term Trend Projections For The USD

Dollar Update & Long Term Trend Projections For The USD

Dollar Update

 

By nature man hates change; seldom will he quit his old home till it has actually fallen around his ears. Thomas Carlyle, 1795-1881, Scottish Philosopher, Author

Dollar Update

 In this  Update, we will examine what is going on with the dollar. Where it is headed and what to expect in the future. So without ado, lets hit the road jack as the saying goes.

1015_clip_image002

The rapid breakdown of the dollar after putting in a series of new highs illustrates what lies in store for it in the years to come. However, in the interim, some sort of relief rally is to be expected as the dollar has mounted a very hard correction in a relatively short period of time.

The 2-year chart above reveals that the dollar is very close to hitting a very strong support zone that falls in the 75.00-75.50 ranges. A test of this zone should lead to a bounce that has the potential of taking the dollar to the 80-82 ranges.

Dollar Vs Major Currencies

Let’s take a look at some of the currencies via their corresponding ETF’s to see how they are holding up.

1015_clip_image004

The Pound traded to 170 ran into resistance and has since pulled back. It could potentially trade all the way down to the 145-150 ranges before mounting another rally.

1015_clip_image006

The Yen is also fast approaching a zone that offers strong resistance (114.40-114.61). If it tests this zone again and breaks down, it will have put in a triple top formation, which normally always leads to very strong correction.

1015_clip_image008

FXC has just traded above a zone of strong resistance and a failure to hold above this level will result in a pullback to the 87-87 ranges. Given the intensity of the current rally, there is a strong possibility that this break out will fail and lead to a pullback.

1015_clip_image010

It has experienced a brutal correction in a rather short period of time. It is trading at new 52 weeks low and is very close to testing its 2-year lows. However, note that it is now very close to testing a very strong zone of support, and as it is extremely oversold, there is a fairly strong chance that it will mount some sort of rally soon.

1015_clip_image012

This dollar bearish ETF is fast approaching a zone of strong resistance (28.50-29.00). UUP has generated several negative divergence signals, and it is now trading in extremely overbought, hence the odds favour a correction.

Dollar Update; Everyone is Turning Bearish

Nearly everyone is bearish on the dollar so from a contrarian perspective, this is a bullish development as the majority are nearly always wrong.

A lower dollar makes exports cheaper and imports more expensive; this is not what most nations want right now, especially as the U.S. consumer is cutting back and most economies are very fragile.

Finally, from a mass psychology perspective, the following article indicates that we are at some sort of turning point for whenever the press starts to comment on something a trend change is normally in the works.

Over the last three months, banks put 63 per cent of their new cash into euros and yen — not the greenbacks — a nearly complete reversal of the dollar’s onetime dominance for reserves, according to Barclays Capital. The dollar’s share of new cash in the central banks was down to 37 per cent — compared with two-thirds a decade ago. Full story

Dollar Update; What’s the Outlook Going Forward

We are not long-term dollar bulls, but we feel that dollar is due for a relief rally as it has mounted a very strong correction in a relatively short period of time. We felt the same way from late 2007 to early 2008 and went on record to state that the dollar would mount a very strong rally that would catch the majority with their trousers down.

Additionally, after studying the charts of several currencies we find that most are fast approaching strong zones of resistance, which should lead to correction before the next leg up. As the dollar has been hammered so viciously it would not be wise to open up new bets against it now. The most prudent move would be to wait for a rally before placing new bets against it, and if you are willing to take a bit of a risk you might even consider opening up long positions in the Dollar and or short positions in the Euro.

Our long-term view is that the dollar is in trouble, and it could potentially shed an additional 60% of its value in the years to come, but for now, the outlook is still bullish. We do not fight the trend.  The trend is your friend, everything else is your foe.

if we begin with certainties, we shall end in doubts; but if we begin with doubts, and are patient in them, we shall end in certainties. Francis Bacon 1561-1626, British Philosopher, Essayist, Statesman

Other articles:

IBM Stock Price Today

Contrarian Definition

Dow 30 Stocks

Investing stock futures

Stock market crash 2020

Dogs of The Dow

BIIB stock Price: Is it time to buy

Stockta

Stock market crashes timelines

Stock Market Forecast

Next Stock Market Crash

Inductive vs deductive

Dow theory no longer relevant-Better Alternative exists

Apple Stock Predictions For 2020 and Beyond 

In 1929 the stock market crashed because of

Stock market crash 2019

Apple Stock Price Target: Is It Time To Buy AAPL

Anti Gmo: The Anti Gmo Trend Is In Full Swing?

From GMO Foods To GMO Humans: What’s Next 

Apple Stock Buy Or Sell: It’s Time To Load Up In 2020

 

All charts provided courtesy of www.prophetfinance.com and www.stockcharts.com