Macro Bearish Trend on US Dollar IndexThe scenario above is an incredibly bearish macro trend I have noticed in the US Dollar Index.
The base trendline shows a convincing downward trend that has been forming since the start of the 1980’s.
Peak 1 shows us that the strength of the USD was at a peak of 164.72 in March of 1985, representing a +94.37% increase that occurred over the course of 1,796 days. The crash that followed was the longest experienced in the trend, representing a -52.44% loss over a 2,832 day period.
Peak 2 shows us diminishing strength over the longer-term and peaks at 120.33 over the course of a 3,196 day bullish run of +55%, followed by a crash triggered by the 2000 bubble. The crash lasted 2,465 days and represented a loss of -41.04%.
Peak 3 is in the midst of forming and if my analysis is correct, it represents a bullish run of +44.4% over a 4,354 day period. The predicted crash will run the course of 2,072 days and represent a loss of -40.2% from the peak experienced during COVID-19 market crash on the day 03/23/2020. My prediction for the index is that it will continue to downtrend towards the first major support and then begin to enter a resistance phase, possibly showing signs of recovery sometime between December 2021 and December 2022. The Index will break the support zone and slide past the final support zone towards my target price. The target price is 61.96 on December 1st of 2025.
I noticed a relationship that as the index has moved through time, the bullish run on all 3 peaks has increased in duration but has decreased in the total percentage change. For the bearish scenarios, all 3 have decreasing durations but also have decreasing percentage changes.
Recently over the past 6 months, the dollar index has been moving in a fairly close to perfect negative correlation, in which the dollar index is rapidly losing value as equities are climbing to all time highs. There have been other examples of this negative correlation at play, such as when the dollar index was on the rise as the Dot Com bubble was playing out. These negative correlations never hold up and the markets always follow in the direction of the Index or vice-versa, which leads me to believe an inevitable crash is on the way. I will be doing another post on the correlation between the S&P 500 (SPX) and the USD Index (DXY); showing exactly how I think this could play out.
