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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:

DollarJune10

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.

The Myth of Shocks

Read Chapter 1 of Prechter's Socionomic Theory of Finance.

EXCLUSIVE

EuroSTOXX 50: One Way to Label This Chart You May Not Have Considered

An Elliott wave contracting triangle is a price pattern that often forms in a corrective wave 4 position -- meaning, a big move in wave 5 comes next. However, a variation of the triangle called a "running triangle" offers additional possibilities. Watch our European Short Term Update editor walk you through a chart of the pan-European index of 50 stocks and explain the implications.

EXCLUSIVE

Stocks and Skyscrapers Here We Go Again

We're not the first ones to notice a curious correlation between the timing of record highs in the stock market and proposals for building new skyscrapers. Watch our Financial Forecast co-editor discuss the latest proposal for an "upside-down" skyscraper in New York City.