Since I’ve referenced a dollar freefall in the headline, you might have guessed that it’s time to get a good long-term perspective on what's happening in the US dollar.
So here’s the 45-year chart of the USDI (US Dollar Index):
USDI measures the dollar against a half dozen major currencies. While this is somewhat of a lagging chart, it does give you the big picture.
Over the past 10 years, we've seen an enormous rally in the US dollar which took the Euro down from 1.60 all the way to 1.02. But despite this large and extended rally, the USDI has been making successively lower highs over 45 years.
This creates a bearish descending triangle pattern for the dollar. A few months ago, I began to speculate that the dollar was going to turn lower. Today it’s beginning to confirm the double top I identified right at the trendline of that triangle.
In fact, the Euro has appreciated from 1.06 to 1.19 recently, and I don’t think that run is done yet.
That’s because there’s still a lot of room for the dollar to fall to 85 or thereabouts on the 45-year chart. So USDI should weaken substantially over the coming months and years.
Here’s a monthly chart of USDI so we can drill down to look at the price action in more detail:
The double top on the long-term 45-year chart is apparent on this monthly chart. The second of the two tops formed during the height of the epidemic when there was an enormous fear-based rush into dollar liquidity.
Now USDI has turned lower and is approaching the prospective neckline of that double top.
A double top is a reversal pattern, so it’s likely that we’ll see a downtrend establish itself once that neckline has been breached. (There was an uptrend going into the double top and soon the reverse should be true.)
This is somewhat of an early call as that USDI neckline isn’t breached yet, but all the signs are in place for it to happen. That thesis holds up when we look at the weekly chart of USDI too:
Again, it’s obvious how USDI hit a major resistance level and is starting to roll over with a double top.
On this weekly timeframe (each bar represents one week instead of one month as before), there’s also a bearish head and shoulders pattern which – like a double top – is also a reversal pattern. USDI has even broken through the neckline of that head and shoulders already.
And it certainly looks like there’s a lot more room to drop. Even if USDI pauses at the support line lower down, the overall trend is becoming clear.
Something doesn’t feel right, does it?
- Much of the world is on lockdown.
- There is 15-20% unemployment in the US.
- Business has practically shutdown.
Yet, the stock market is rallying and the US Dollar is looking strong.
But what is bubbling away under the surface and what is going to happen next?
Well, in this week’s video report, I shared exactly what I’m seeing and why the charts are already showing us what is going to happen next.
- The real reason behind the stock market rallying (and why the government have already achieved what took them six months to do in the 2008 crash)
- With unemployment rates similar to the Great Depression, what does this mean for the US economy and will the trillions of dollars being dumped into the system save the US or ruin the economy?
- Stop asking yourself “WHY?” in the markets and the only two questions that you should ever ask before making any trading decision (understand this, and it will help you to detach the emotion from trading that trips so many people up!)
- The glaring “Ascending Broadening” price pattern on this controversial trade and what you should be doing TODAY to be on the winning side of the next big swing.
- The unconventional AUDUSD bear trap, why it’s VERY DANGEROUS for lethargic traders and where the opportunity is within this trade for the fast action takers
- A real-life example of how to stack risk/reward in your favor and why you must always be objective when trading (ignoring everything that the media tells you!)
- Is the weakest currency emerging as one of the strongest currencies on the board? And what does this mean for the rest of the world’s currencies against the US Dollar
- Why there’s 2000 pips on the downside on THIS pattern (and what you should be waiting for before being part of this HUGE trade) – watch from 16:30
- The 45-year chart that shows why the biggest US dollar collapse could be on the horizon (and what this means for trading the USD today)
- The governing price pattern on XUAUSD and why the future pattern has already been “written in the stars”
- Plus Much More
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