Best of the Week
Most Popular
1. Dollargeddon - Gold Price to Soar Above $6,000 - P_Radomski_CFA
2.Is Gold Price On Verge Of A Bottom, See For Yourself - Chris_Vermeulen
3.Dow Stock Market Trend Forecast 2018 - Nadeem_Walayat
4.Gold Price to Plunge Below $1000 - Key Factors for Gold & Silver Investors - P_Radomski_CFA
5.Why The Uranium Price Must Go Up - Richard_Mills
6.Dow Stock Market Trend Forecast 2018 - Video - Nadeem_Walayat
7.Jim Rogers on Gold, Silver, Bitcoin and Blockchain’s “Spectacular Future” - GoldCore
8.More Signs That the Stock Market Will Rally Until 2019 - Troy_Bombardia
9.It's Time for A New Economic Strategy in Turkey - Steve_H_Hanke
10.Fiat Currency Inflation, And Collapse Insurance - Raymond_Matison
Last 7 days
Gold Price Seasonal Trend Analysis - Video - 20th Sep 18
The Stealth Reason Why the Stock Market Keeps On Rising - 20th Sep 18
Sheffield School Applications Crisis Eased by New Secondary Schools Places - 20th Sep 18
Precious Metals Sector: It’s 2013 All Over Again - 19th Sep 18
US Dollar Head & Shoulders Triggered. What's Next? - 19th Sep 18
Prepare for the Stock Market’s Volatility to Increase - 19th Sep 18
The Beginning of the End of the Dollar - 19th Sep 18
Land Rover Discovery Sport 'Approved Used' Bad Paint Job - Inchcape Chester - 19th Sep 18
Are Technology and FANG Stocks Bottoming? - 18th Sep 18
Predictive Trading Model Suggests Falling Stock Prices During US Elections - 18th Sep 18
Lehman Brothers Financial Collapse - Ten Years Later - 18th Sep 18
Financial Crisis Markets Reality Check Now in Progress - 18th Sep 18
Gold’s Ultimate Confirmation - 18th Sep 18
Omanization: a 20-year Process to Fight Volatile Oil Prices  - 18th Sep 18
Sheffield Best Secondary Schools Rankings and Trend Trajectory for Applications 2018 - 18th Sep 18
Gold / US Dollar Inverse Correlation - 17th Sep 18
The Apple Story - Trump Tariffs Penalize US Multinationals - 17th Sep 18
Wall Street Created Financial Crash Catastrophe Ten Years Later - 17th Sep 18
Trade Wars Are Going To Crash This Stock Market - 17th Sep 18
Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - 17th Sep 18
Financial Markets Macro/Micro View: Waves and Cycles - 17th Sep 18
Stock Market Bulls Prevail – for Now! - 17th Sep 18
GBPUSD Set to Explode Higher - 17th Sep 18
The China Threat - Global Crisis Hot Spots & Pressure Points - 17th Sep 18 - Jim_Willie_CB
Silver's Relationship with Gold Reaching Historical Extremes - 16th Sep 18
Emerging Markets to Follow and Those to Avoid - 16th Sep 18
Investing - Look at the Facts to Find the Truth - 16th Sep 18
Gold Stocks Forced Capitulation - 15th Sep 18
Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - 15th Sep 18
Trading The Global Future - Bad Consequences - 15th Sep 18
Central Banks Have Gone Rogue, Putting Us All at Risk - 15th Sep 18
Gold Price Seasonal Trend Analysis - 14th Sep 18
Growing Number of Small Businesses Opening – and Closing – In the UK - 14th Sep 18
Gold Price Trend Analysis - Video - 14th Sep 18
Esports Is Exploding—Here’s 3 Best Stocks to Profit From - 13th Sep 18
The Four Steel Men Behind Trump’s Trade War - 13th Sep 18
How Trump Tariffs Could Double America’s Trade Losses - 13th Sep 18
Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - 13th Sep 18
Trading Cryptocurrencies: To Win, You Must Know Where You're Wrong - 13th Sep 18
Gold, Silver, and USD Index - Three Important “Nothings” - 13th Sep 18
Precious Metals Sector On a Long-term SELL Signal - 13th Sep 18
Does Gambling Regulation Work - A Case Study - 13th Sep 18
The Ritual Burial of the US Constitution - 12th Sep 18
Stock Market Final Probe Higher ... Then the PANIC! - 12th Sep 18
Gold Nuggets And Silver Bullets - 12th Sep 18
Bitcoin Trading - SEC Strikes Again - 12th Sep 18

Market Oracle FREE Newsletter

Trading Any Market

US Dollar at the Start of Multi-Year Downtrend

Currencies / US Dollar Mar 05, 2018 - 02:39 PM GMT

By: ElliottWave-Forecast

Currencies

Since the US Dollar trades freely in the 1970s, on average it has rallied and declined in a period of 7.5 years. The chart below shows short term and long term US Dollar cycle:


Short Term and Long Term US Dollar Cycle

From the chart above, we can see that since 1970s, the cycle in US Dollar from peak to peak (blue color) is about 15 years on average. The 15 year peak-to-peak cycle is subdivided into 2 sub-cycles: USD weakness period (peak to trough) in red color, and USD strength period (trough to the peak), in green color. Each sub-cycle lasts roughly 7.5 years on average.

US Dollar currently appears to have ended the last peak on January 2017. The previous cycle in USD strength (green color) lasted from September 1992 – July 2001 for a period of 8 years 10 months. The latest cycle in USD strength (green color) lasted from March 2008 to January 2017, which is the same 8 years 10 months up-cycle compared to the previous one.  The peak-to-peak cycle has also reached the average of 15 years.

If this cycle is going to repeat, then US Dollar appears to continue to get weak in red cycle (downtrend) from year 2017 to 2024 – 2025 before it starts a 7 year up cycle (green color) from year 2024 to 2031. What leads to the trend change in USD is a combination of valuation, current account dynamic, and the Central Bank Action like the chart below from Nomura shows:

Overvaluation

Based on the Purchasing Power Parity, US Dollar on average is 20% overvalued against other major currencies, including Yen, Euro, Pound, and Canadian Dollar. Valuation extremes usually suggest the US Dollar has gone too much and we have started to see the reversal lately and likely will continue to see it in the next few years.

Growing Account Deficit

The US current account deficit now is running at 3%. Current account is the total export value of the goods and services minus the total imports. In the last 30 years, when the US account deficit reaches extreme levels between 2.5 – 3%, the Dollar is close to reversal. The last time US Dollar reached multi-year peak at 1985 and 2001, the US also had a current account deficit of 2.5 – 3%.

Central Bank’s Action

In the past, we saw a divergence in the monetary policy and interest rate between the Fed and other central banks, causing US Dollar’s strength. For example, the Fed started tapering in 2013 and hiked the interest rate in 2015, whereas other central banks were still loosening policy. This divergence caused US Dollar to soar and appreciate against other major currencies.

However, global recovery caused other central banks to also unwind the loose monetary policy. The Bank of Canada has started to hike rate. ECB and BOJ have started to taper bond’s buying. This removes one major support for USD and makes the dollar vulnerable even if the Fed continues to hike further.

If you enjoy this article, check our work and join Free 14 days Trial to see Elliott Wave Forecast for 78 instrument, as well as getting access to Live Trading Room, Live Session, and more.

We are also currently running limited-time 30% promotion for any monthly plan of your choice. Just click here to get your discount.

By Ayoub Ben Rejeb

https://elliottwave-forecast.com

ElliottWave-Forecast has built its reputation on accurate technical analysis and a winning attitude. By successfully incorporating the Elliott Wave Theory with Market Correlation, Cycles, Proprietary Pivot System, we provide precise forecasts with up-to-date analysis for 78 instruments including Forex, Commodities, Indices and a number of Stocks & ETFs from around the World. Our clients also have immediate access to our proprietary Actionable Trade Setups, Market Overview, 1 Hour, 4 Hour, Daily & Weekly Wave Counts. Live Screen Sharing Sessions, Daily Technical Videos, Elliott Wave Setup and Weekend videos .

Copyright © 2018 ElliottWave-Forecast - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules