U.S. Dollar May Be Starting a Long-Term Slide
A lot of bearish things seem to be happening with the U.S. dollar index.
First was a giant doji candlestick on the monthly chart in March. This occurred near the previous high from January 2017. A big reversal pattern at resistance is nothing to ignore.
Second was a tightening range throughout April and most of May. DXY exited that pattern to the downside and proceeded to fall for eight straight sessions. That was its longest losing streak since October 2004. (See our Price Streak custom script.)
Three weeks of consolidation came next, and now that price action is looking a lot like a bearish flag.
Commodities and equities are also providing some intermarket signals.
Silver had its biggest monthly gain in May since 2011. FOREXCOM:CUUUSD had its best month in June since November 2016. There’s also been a rush to global stocks – especially Chinese stocks. And speaking of China, the yuan is having its biggest rally against the greenback today since March. (All these symbols move against the dollar.)
This all makes sense when you consider the backdrop of a super-dovish Federal Reserve, plus calmer trade tensions with China.
But finally, you have the long-term macro trend of DXY losing value. The greenback had a major decline between 1985 and 1995, then a rebound after the Asian and Russian crises. It slid again between 2002 and 2007 in the globalization rush – the age of “BRIC.” The 2010-15 period saw a countertrend rebound because of a slowdown in China and European problems like Greece. But now those are in the rearview mirror.
The dollar, and most currencies, have been very stable since then. Will prices start moving again?
First was a giant doji candlestick on the monthly chart in March. This occurred near the previous high from January 2017. A big reversal pattern at resistance is nothing to ignore.
Second was a tightening range throughout April and most of May. DXY exited that pattern to the downside and proceeded to fall for eight straight sessions. That was its longest losing streak since October 2004. (See our Price Streak custom script.)
Three weeks of consolidation came next, and now that price action is looking a lot like a bearish flag.
Commodities and equities are also providing some intermarket signals.
Silver had its biggest monthly gain in May since 2011. FOREXCOM:CUUUSD had its best month in June since November 2016. There’s also been a rush to global stocks – especially Chinese stocks. And speaking of China, the yuan is having its biggest rally against the greenback today since March. (All these symbols move against the dollar.)This all makes sense when you consider the backdrop of a super-dovish Federal Reserve, plus calmer trade tensions with China.
But finally, you have the long-term macro trend of DXY losing value. The greenback had a major decline between 1985 and 1995, then a rebound after the Asian and Russian crises. It slid again between 2002 and 2007 in the globalization rush – the age of “BRIC.” The 2010-15 period saw a countertrend rebound because of a slowdown in China and European problems like Greece. But now those are in the rearview mirror.
The dollar, and most currencies, have been very stable since then. Will prices start moving again?
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