Time's Up for the Dollar

The 2019/2020 time frame was my expected limit for the U.S. dollar bull market going by the previous cycle. I expected things would have blown up by now. Fundamentally, the case for a dollar bull market remains. Central banks have gone to extreme lengths, but they're doing more of the same since 2008. The significant change is government spending. If austerity is over, then the conditions in place from 2008-2020 have changed. Additionally, cycles matter. It is possible this dollar bull market missed its moment. 

There aren't enough time periods to make for a sample set with the U.S. Dollar Index, but the behavior of the dollar in this cycle has been very similar to the prior two, particularly the last one. There was a choppy consolidation after the bear market, a bullish breakout followed by a test of the 7-year moving average, before running for a couple more years. In the early 2000s, the dollar would make a new high. This time it failed to do so. 

The prior two bear markets broke the 7-year moving average like it was nothing. The 14-month RSI moved into oversold territory and stayed there for 2 more years. The SlopeChart below is quarterly to highlight the ensuing plunge-o-rama.

If the dollar doesn't enter a bear market, it's because something shocks it back into a bullish trend. A "gray rhino" from China or an unforeseen Black Swan. Otherwise, the chart is pointing down.