We cover prior analysis on the U.S. Dollar and project targets based on the work of Edson Gould.
Review
On February 16, 2021 and July 11, 2021, we wrote pieces on the U.S. Dollar Index. In the February 2021 piece, we closed with the comment:
“We're not as worried about the decline to a new low as much as we are concerned about a sudden rise to the upside.”
In the the July 2021 article, we said:
“If the Index can exceed the 103.21 level, the Index will likely achieve 118.03 and make a move to the descending upside speed resistance lines at 133.90.”
As we’ve said in the past, we’re not specialist in the mechanics of the dollar. However, price seems to be something we’re more attuned to.
Price Momentum Review
Based on the price momentum data, the U.S. Dollar Index appears to be just past the historical mid-point on the way to a new peak. In the last cycle from the low, the process of peaking lasted slightly more that one year (March 7, 2018 to April 25, 2019). We’d look for a similar ascent covering approximately the same timeframe, until proven otherwise. This suggests that the current run should peak around May-July 2022.
Upside Targets
It is very difficult to make a case for the downside especially with the ascending double bottoms of 2008 and 2011. To gauge the upside prospects based on the double bottom, we need only go back to the 1995 low at 80.27 and the subsequent peak of 120.90 in July 2001. The increase at that time was approximately +50.61%. Applying that same percentage increase to the 72.93 low in 2011, we arrive at a intermediate peak of 109.84.
According to the work of Edson Gould’s Speed Resistance Lines, there should be little downside risk. However, we’re always cognizant of the risk and the prospect of declining back to the 2008 levels. Having said that, the U.S. Dollar Index appears to be using the 118.03 level as the support. This means that the upside risk is between 109.84 and 118.03.
