Today's column is the first in a five-part series titled "What Were You Reading About The U.S. Dollar In 'X'?"
"X" being one of five specific time periods over the last two years. Our series offers a historical account of the mainstream media's take on the future outlook for the U.S. currency at each interval -- versus Elliott Wave International's (EWI, for short) analysis of the market.
During each episode, a clear pattern emerges: The popular authorities fully embrace a certain trend for the dollar right as that trend is about to slam on the brakes and make a complete U-turn in the other direction.
The first period we look at is early 2008. At that time, the greenback was about as well-received in the global currency world as today's BP executive is to Green Peace. To wit: From its 2005 peak to its March 2008 bottom, the U.S. dollar had plunged 40% in value to a new, lifetime low against the euro.
And, as far as the usual suspects were concerned at the time, the only way to see the buck going up was to stand on your head. Here, the following chart of the U.S. Dollar Index from 2007-2008 integrates the bearish-dollar world view of the leading media outlets and personalities.
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"No End In Sight For Weak Dollar," reported a March 16, 2008 New York Times -- one day before the currency hit its final low. And check this out: "Dollar's Reign Coming To An End," from a July 3, 2008 Tehran Times -- even as prices were six weeks into a sidelong advance.
Fact is, in March 2008, the daily percentage of dollar bulls fell to a (then) record low of 6%. Mathematically speaking, there was hardly anyone left out there who could sell. But, nothing confirmed the end to the currency's downtrend like a fully mature Elliott wave structure. Here, the following archive of EWI analysis steps in:
- March 14, 2008 Short Term Update: "When the euro makes it turn from trendline resistance, the US Dollar Index should start a multi-month rally phase."
- July 2 Currency Specialty Service: [On the euro] "The rally underway since late 2005 is nearly equal to the prior advance. Equality measures are common and we're watching carefully for evidence of a reversal."
- July 18 Currency Specialty Service: [On the euro] "The upside is becoming limited while the risk to the downside is rapidly increasing."
- August Elliott Wave Financial Forecast: "The US Dollar Index, the near mirror opposite of the euro, should rally. The dollar is heading higher."
By August 2008, the dollar shattered the chains of a sideways trend and started to soar in earnest. November saw the market's strongest monthly advance in 17 years. And, a full year of gains later, the same mainstream experts who counted the currency among the many casualties of the credit crisis in 2008 -- NOW hailed the buck's "built-in disaster premium."