US Dollar Index Chart Bullish: US dollar Multi-Year Bull Market Still Intact

US Dollar Index Chart Bullish: US dollar Multi-Year Bull Market Still Intact

The US Dollar Index Chart is Putting In A Very Bullish Pattern

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

On a separate note, the Fed has a huge amount of leeway once we enter the next stage of the currency wars.  By hiking rates early on the cycle, the Fed can easily 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 decline in the value of a nation’s currency will unleash the inflation beast, and that is something nations like  China can’t afford right now. We are in the midst of a massive currency war.

For now, the US has a plethora of weapons to deploy against any nation that decides to engage it. We suspect that Europe will decide 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 in a very bullish mode. Note that it’s trending well above the main uptrend line and it would have to break through a 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 ranges, and then an even stronger layer of support comes into play in the 83.00 ranges. 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 for 2018 is still Bright

However, given the momentum and the current trade war atmosphere, the odds of the dollar trading below 92.00 on a monthly basis are quite low. Moreover, the US economy is strong; GDP came in at  4.1% for the quarter, and US Consumer sentiment is still very strong.   Europe’ growth rate in comparison is still anaemic, and China is on it’s way to the dog house as it’s just a matter of time before other nations join forces with the US.   Markets are forward-looking beasts, and the Chinese markets have already spoken; they are indicating China Cannot win the Trade war battle; their only choice is to surrender and then come to the negotiating table. The longer they fight, the harsher the terms will be.

The above chart is a monthly chart of the dollar index; here the US dollar index has plenty of room to move before it hits the overbought ranges. However, on the weekly charts, it is now trading in the overbought ranges, so its time for the dollar to consolidate.  The dollar could trade as low as 92.00 with a possible overshoot to the 91.00 ranges. We would use strong pullbacks to establish new long positions in the US dollar index

Conversely, the Euro is trading in the extremely oversold ranges on the weekly charts, so it’s looking for any reason to trend higher. Risk takers can use strong pullbacks to open long positions with the intent of closing the within the next 3-6 weeks. This is not a long-term play. Once the consolidation in the US dollar index is over, it is expected to soar upwards, and the Euro is projected to continue its downward journey.

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