Did you know that since the Trump administration took office, the US dollar (USD) has fallen a huge 11%?
The US dollar has been in a steady downtrend despite the extreme exuberance in the US stock market. But last week, things really headed downhill for the dollar.
That’s because US Treasury Secretary Steve Mnuchin indicated he favored a weaker dollar last week, supposedly to encourage American exports. That was quite a departure from previous administrations who have always talked up the dollar.
And so the dollar got crushed in the wake of that comment.
In fact, it closed the week under the support line of the longer-term “megaphone top” price pattern I’ve identified for you in the chart below.
The damage was so severe the dollar cratered to a three and a half year low.
So what does that mean going forward? The close below the support line confirms the bearishness of the megaphone top pattern. Let me explain …
The height of any megaphone top (a bearish pattern) offers us an estimate of how low the price will eventually fall once it breaks below the support line.
Generally speaking, the height of the megaphone top correlates 1:1 to the depth of the later decline.
I’ve drawn a projection for you indicating exactly that. Due to the height of the megaphone top, the US dollar should fall to at least 108 from where it is right now. And it might go even lower than that over the course of 2018.
It won’t be a straight line decline, of course.
I expect a pullback to the support line in the near future before the next decline takes hold. Especially when the immediate focus of the market will be on the next FOMC meeting. Most analysts expect there will be two or three rate hikes this year. However, a broad-based pickup in global growth will likely push other central banks to follow the Fed’s lead. This will likely contribute to the dollar’s continued plunge.
The bottom line is that USD appears vulnerable to much steeper losses over the course of 2018.
But the near time pullback to 116 should give us a chance to load up on some of the best forex instruments to take advantage of that.
I’ve outlined three for you here in this article.
The Pound, the Yen and the Aussie: Dollar Decline Beneficiaries
The pound is a strong contender to shine very brightly this year.
That’s because GBPUSD’s recent close above a major long-term downtrend line on the weekly charts projects much higher prices over the long term.
In fact, I’m so bullish on GBPUSD I expect it to hit the pre-Brexit crash level of 1.5000 in the next few months.
Here are the reasons why:
Way back in October 2016 and January 2017, GBPUSD made a double bottom. That’s very bullish. A double bottom is confirmed when the price rises over the neckline from that double bottom and then retests it. You can see how that happened during 2017.
Now the downtrend line has been broken and we’re seeing a strong move upward in GBPUSD. Because last week’s runup was so large, I’m expecting a bit of a pullback in the next week or two. We might be able to get in at 1.4000.
If so, that gives us at least 1,000 pips to the upside. That’s worth $10,000 for every lot you trade in your account.
Remember that during 2017, we bagged more than 9,000 pips all together. For every one lot contract that’s $90,000 in profit. (Even small accounts could have brought in $9,000 or more.)
A 1,000 pip move in GBPUSD (or better) would help boost 2018 to an even higher total than last year. Just be patient and pick a good entry if we’re lucky enough to get a decent pullback in this pair.
Now for the second of the three pairs I want to talk about today …
USDJPY (the dollar against the Japanese yen) is also looking very encouraging for big profits.
In 2015-2016 this pair formed a head-and-shoulders bear price pattern. More recently, it traced out a descending triangle pattern also. That’s also very bearish.
So we want to be short this pair (again) when a good opportunity presents itself.
While USDJPY is likely to slide sideways a bit more inside the descending triangle, I believe it’s set to hit a lower trajectory and reach parity at 100 (or even lower) later this year.
If you can take a short position in the dollar against the yen at 110, that gives you 1,000 pips ($10,000 profit for each standard lot) if USDJPY hits parity as I predict.
I’m very confident of this, as I already predicted a major fall in USDJPY in 2018. We started off the year off with a gain of nearly 500 pips on cumulative short USDJPY positions already.
The move isn’t over yet. Not by a long shot. I expect there’s at least 1,000 pips more to go in this pair. I’ll be looking for further opportunities to go short here.
My last pick to exploit US dollar weakness is to buy the Australian dollar (AUDUSD).
Consistent with the weaker US dollar, AUDUSD should go higher this year.
See the chart below ….
AUDUSD made a double bottom way back in 2015 – 2016. Just as with GBPUSD, that bullish pattern is confirmed when the price rises and retests a support line.
There’s been two of them in AUDUSD, actually. Throughout 2016 and 2017, the Australian dollar tested and then broke through both lines I’ve drawn on this chart. Its latest breakout is the most powerful yet. It has one more resistance level to clear, and then we’re off to the races.
We’re looking at massive profits in this pair if AUDUSD can regain its 2014 high at 0.9400. That’s 14,000 pips away.
For now, I’m looking to see how long it takes for AUDUSD to break the final resistance level. After that, any pullback is a potential buying point.
By now, you might be wondering why I’m so confident in making these predictions and the resulting trades.
I’m always looking for trading opportunities with suitable risk/reward criteria. I’m not a swing trader, a reversal trader or a trend trader. Instead I simply play what’s in front of me by analyzing very simple price patterns and the enormous moves they predict from approximately 30 instruments.
These kinds of moves tend to catch a lot of participants by surprise. But if you know what to look for, the market has a way of indicating — or pointing — when and where it’s about to make a turn.
And if you can identify these market swings before they happen, then you’ll always have a distinct advantage over those traders who can’t. You’ll also make a lot of money.
That’s what I specialize in doing as The Pattern Trader.
So if you’re unsure how to trade the deathly dollar decline this year, then let me help.
I’m preparing an event to show you exactly how it’s done.
My LIVE 2-Day Bootcamp is where I’ll demonstrate exactly how to make currency trades just like the ones I’ve outlined here, including my “Lazy Trader’s” 5-step execution plan that’s pulled in more than 9,000 pips in 2017.
We’ve already got 500 pips this year by going short USDJPY too.
I don’t want you to miss your chance to capitalize on 2018’s dollar drop, a bullish scenario in spot gold, continued huge profits in GBPNZD and all the other high performance trade setups I see each day and week.
This is your chance to make 2018 your most profitable trading year ever!