US Dollar Index Chart: Bullish Signals for Prolonged Uptrend

The US Dollar Index Chart: Ready To Top

US Dollar Index Chart Poised for a Resounding Surge

Updated Dec 01, 2023

Let’s start by looking at the current outlook as of December 2023. Then, we’ll reflect on our past analyses over the years. We firmly believe that learning from history is crucial to avoid repeating its mistakes, and this principle guides all our analyses.

US Dollar Index Monthly Chart 

The dollar has seen a remarkable rally, yet it’s still trading in the highly oversold range on the monthly charts. This fact alone indicates that the buzz surrounding the BRIC currencies is nothing but flatulence. On a deeper level, it highlights the intricate nature of the Russian and Chinese strategy to create a resource-driven geopolitical dynamic. “As long as the dollar remains above 101.55 on a monthly basis, the outlook stays bullish. Sharp pullbacks should be seen as buying opportunities.”

Global Shifts: How the West’s Actions Play into Russia’s Hands

It’s worth noting that if the U.S. hadn’t pushed Russia to its limits, it might not have pursued this course. While the Chinese possess the patience to wait for decades for their strategies to unfold, the Russians excel at orchestrating intricate geopolitical manoeuvres, much like masters of a chessboard. Yet they have a distinctive pattern or flaw, whichever way you perceive it – they don’t typically act until they are pushed to their limits or their red line is crossed. It’s challenging to discern either one definitively, but one sign is their increased vocalisation as you draw near that line.

The West’s actions have triggered yet another peculiar pattern in the context of Russia. When the Russian bear is provoked or activated, it persists until it has neutralised its perceived enemy. It’s vital to emphasise that this doesn’t necessarily indicate the onset of a full-blown war. If a conflict emerges, the West will more likely initiate it, with the U.S. taking a lead role. Russia’s strategy seems to revolve around resource-focused strife but will engage in a hot war if pushed.

However, one critical aspect the West should be concerned about is that the Russian Bear, though currently irritated, has not yet reached a state of anger. If it were to reach that point, the situation could deteriorate significantly, particularly in Europe.

The actions of the West have inadvertently played right into Russia’s hands and, by extension, into China’s as well.

When we survey the geopolitical chessboard, it becomes evident that even traditional adversaries like Saudi Arabia and Iran have forged peace and aligned themselves with Russia. Meanwhile, China’s formidable powerhouse has established an unbreakable bond with Russia in Asia. Despite the noise from experts, this bond will likely endure and strengthen for decades. Significant portions of Africa, including the influential South Africa, have also aligned with Russia, and several nations in South America are following suit.

It’s essential to acknowledge that today’s China is vastly different from the China of Mao Zedong, and Russia is no longer the Soviet Union of Stalin or Yeltsin. Both of these nations are formidable powerhouses in their own right.

This video highlights just how fast Russia is advancing. Russia also has a bullet train and is working on other routes. In the US, we are still riding the donkey express. China is still the undisputed heavyweight champion regarding bullet train networks.

In summary, while the dollar will experience a rally, the ongoing resource war can potentially mitigate its effects significantly. It’s worth noting that, related to this topic, one can expect the Federal Reserve to announce a new norm for inflation. The days of the 2% target may be behind us.

Now, let’s delve into the current subject while considering its historical context, as we initially emphasized.

US Dollar Chart: Bullish Signals for Prolonged Uptrend

The outlook for the US dollar  Index (and, by default, the US dollar)remains quite bright; its present trajectory indicates that it is set to batter all the other major currencies.  If the EU decides to engage the Trump administration in a trade war, the Euro will almost certainly trade on par with the dollar.

On a separate note, the Fed has tremendous leeway once we enter the next stage of the currency wars.  By hiking rates early on the cycle, the Fed can quickly lower them if the need arises, and any nation that decides to match them will experience a rapid decline in the value of their currency.  A rapid fall in the value of a nation’s currency will unleash the inflation beast, and that is something countries like  China can’t afford right now. We are in the midst of a massive currency war.

For now, the US has many weapons to deploy against any nation that decides to engage it. We suspect that Europe will choose to work with the US as this will give both Europe and the US a  chance to push  China to the negotiating table. It will be a painful blow for the leaders, but the Chinese people will benefit from this move as it will trigger a movement in China that will resemble what took place in Taiwan years ago when it broke away from mainland China. However, that’s a story for another day.

US Dollar Index Chart In Bullish Mode

US Dollar Index Chart has a very bullish pattern

The US dollar index chart (above) is very bullish. Note that it’s trending well above the main uptrend line, and it would have to break through two levels of solid support to have any chance of ending this bull market. The first strong layer of support comes into play in the 88.00 range, and then an even stronger layer of support comes into play in the 83.00 range. The dollar would have to close below both these levels on a monthly basis to indicate that lower prices were on the horizon.

US Dollar Outlook After Trade War With China

The chances of the dollar trading below 92.00 on a monthly basis are low, given the current momentum and trade war atmosphere. Additionally, the US economy is strong, with a GDP of 4.1% for the quarter and high consumer sentiment. In comparison, Europe’s growth rate is slow, and China is gradually becoming isolated in the trade war. The Chinese markets have already indicated that China cannot win the trade war, and their only choice is to surrender and come to the negotiating table. The longer they fight, the worse the terms will be.

The monthly chart of the dollar index shows that it has enough room to move before hitting the overbought ranges. However, on the weekly charts, it is currently trading in the overbought ranges, indicating that it is time for the dollar to consolidate. The dollar could trade as low as 92.00, with a possible overshoot to the 91.00 range. Therefore, it is recommended to use strong pullbacks to establish new long positions in the US dollar index.

What’s the Outlook for the Euro

On the one hand, the Euro is trading at deficient levels on the weekly charts, indicating that it is eager to trend higher. Those willing to take risks can consider opening long positions during strong pullbacks to close them within the next 3-6 weeks. It’s important to note that this is not a long-term investment strategy. Once the consolidation in the US dollar index is over, it is expected to rise significantly, and the Euro is predicted to continue its downward trajectory.

The US dollar  Index  Is Now Overbought.

The US dollar index trades in highly overbought ranges on both the weekly and monthly charts. Therefore, the path of least resistance is consolidation or sideways action with a slow drift downwards. But why a slow drift and not a massive pullback? This is because the US still offers the highest interest rates in the developed world and is, therefore, one of the most attractive places for investors seeking safety to park their money. Secondly, as the US lowers rates, the rest of the developed world will be forced to lower rates. In most cases, these rates will turn negative since none of these countries raised rates as much as the US did.

Hence, the bottom line for 2019 is that the dollar will consolidate. Dollar bulls should view any pullbacks through a bullish lens. The stronger the deviation, the better the opportunity.

April 2020 Update on US dollar

Due to the coronavirus pandemic, the Dollar will continue to reign supreme for the foreseeable future. Hence, traders should focus on the weekly charts and open positions whenever the technical indicators are trading to extremely oversold ranges.

A bigger bang would come from opening up long positions in US equities, which you gain from both sides: capital appreciation as the stock market trends higher and currency appreciation if you are residing in a country outside the U.S.

USD Outlook  Dec 2023 Update

The dollar managed to end the week above 103.70; it closed at 104.19. The dollar is now ready to rumble. It’s pretty interesting to note that during the rate-hiking process, the dollar pulled back. What will puzzle many is that it will continue to trend higher during the initial stages of the rate-lowering process. Don’t be surprised if the dollar initially pulls back before surging higher. The path is now in motion for the dollar to test the 108 to 109 range. Before the next top is in place, the USD will trade a lot higher. Market update September 7, 2023

The dollar “rumbled,” surging as high as 107.50 before pulling back. It’s likely to consolidate on the weekly charts. If the consolidation is mild, then the dollar will mount an even stronger comeback. Either way, the dollar is destined to rally higher before putting in a long-term top. However, if the consolidation is minor, then the follow-through rally will be even stronger. A monthly close at or above 107.10 will set the path for a test of the 112.50 to 113.60 range. Market Update October 12, 2023

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