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The US Dollar Up/Down Trends Lasts 6-10 Years and Have Significant % Moves

The index used, Trade Weighted U.S. Dollar Index: Major Currencies, is published by St. Louis Fed and is very highly correlated with DXY.

The central banks policies and govt policies, announced and unannounced, and agreements, as in 1980s, play a big role in currency moves. The latest example is Japanese Yen. However, speculators and momentum players (trend followers) are the primary drivers of trends that last several years until extremes, not justified by economic fundamentals, are reached and reversals follow. The most recent example of the extreme was in Swiss franc that reached a level on 08/09/2011 that was completely unjustified by any fundamentals and was a result of scare tactics by charlatans who claimed that the dollar would become worthless as a result of the fed "printing money," a propaganda lie. My view for the past three years has been that the USD was grossly undervalued against most currencies and with the benefit of hindsight a low in the dollar index was made on 05/02/2011, as can be seen in Figure 1.

Trade Weighted US Dollar Index
Larger Image

Table 1 below shows the duration of the trends and magnitude of the move for each trend in the form of ratio from the high to low:

Table: duration of the trends and magnitude of the move for each trend in the form of ratio from the high to low

My forecast for DXY is a high in the range of 100-110 some time during 2016-2018, in a period characterized by a global depression as central banks fail in their efforts to manipulate the economies to their liking based on a bad economic theory and wishful thinking.


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