U.S. Dollar: When Almost Everyone Is Bearish ...
by Bob Stokes
Updated: June 24, 2020
June started off with speculators decidedly negative toward the U.S. dollar.
On the second day of the month, the Financial Times said:
Wall Street strategists say dollar could be set for 'dramatic' falls
Our June 10 U.S. Short Term Update took note of the bearish sentiment when it showed this chart and said:
The decline from 100.556, the May 14 high, is progressing as an impulse.... Once [the currently unfolding] wave is complete, the U.S. dollar will rally.... Sentiment is rapidly becoming bearish to the extreme. The U.S. dollar DSI (trade-futures.com) is at 22%, nearly matching the 20% that coincided with the March 9 low.
As it turned out, June 10 marked the most recent low in the greenback at 95.716.
Even so, two days later, a June 12 Reuters headline read:
Speculators' bearish bets on U.S. dollar rise: CFTC, Reuters data
And, talk about bearish -- three days after that, a CNBC headline said (June 15):
A dollar crash is virtually inevitable, Asia expert... warns
The article says:
One of the world's leading authorities on Asia... is worried a changing global landscape paired with a massive U.S. budget deficit will spark a dollar crash.
His forecast calls for a 35% drop against other major currencies.
Yes, it's true that the U.S. is running a big budget deficit. It's true that there are still riots in the streets, in parts of the country. It's true that COVID-19 cases are on the rise, the economy is on the ropes and the unemployment is the highest it's been since the Great Depression.
But, from Elliott Wave International's 40-year experience observing and forecasting the markets, our analysts know it's better to pay attention to the greenback's Elliott wave structure and other supporting factors rather than "bearish fundamentals."
Here's just one example as to why. On April 30, 2011, a Wall Street Journal article cited fundamentals as a reason for the then dollar's downward slide:
The main drivers of the dollar's weakness, say economists, are the twin pillars of economic intervention: monetary and fiscal policy. "The market is concerned about the deficit and the Fed," says [a] fixed-income and foreign-exchange analyst....
Well, five days after that article published, the buck hit a major bottom and went on to rally for several years!
Getting back to 2020, as of this writing on June 22, the U.S. Dollar Index remains above its June 10 low. Despite all the "bearish fundamentals."
Keep in mind that EWI's subscribers get to see the Elliott wave labels on our U.S. Dollar Index charts and they clearly indicate what our Chief Market Analyst expects next.
You can see those wave labels for yourself without any obligation for 30 days.
Follow the link below to learn how.
The SCALE of This Elliott Wave Is …
...Historically large. EWI's analysts are closely watching this one: The scale of pattern is simply immense. Consider the big price moves -- down and then up -- since February. You get the idea.
As the May Elliott Wave Theorist reminded subscribers:
You may think that our wave labels are just notations. They are not. They mean something.
Here's more insight from that Theorist:
When the DJIA fell 38.8% in 2000-2002, it took three months shy of two years. This year, a decline of 35.4% in the S&P took less than five weeks.
The extent of the rally since has also occurred in a remarkably brief time.
Following these "huge changes," one must wonder: What's next?
Let our Elliott wave experts provide you with their timely insights via a 30-day, risk-free trial.
Follow the link below and you're on your way to learning what you need to know at this very juncture.
On June 5, our Metals Pro Service showed subscribers a gold chart and said a price action was "opening the door to considering bullish potential" beyond the 2020 highs. The $140 per ounce rally to 9-year highs followed this analysis.
When the trend turns in major stock indexes, a curious thing often follows: certain traders think the old trend is still unfolding. In this video, EWI's Brian Whitmer shows you exactly how this happens and why it's so dangerous.
Our July Global Market Perspective notes that there has been a "distinct relationship" between two economic / monetary indicators over the past 20 years. The annual change in one of them has "collapsed." Learn what our global analysts expect for the other indicator "over the next 18 months or so."