Contrary to what some would have us believe the dollar is still in a secular bear market. Yes I will be the first one to admit that it is currently in a cyclical bull phase (I said so when the 50 crossed above the 200 and the 200 turned up) …the same applies to the stock market by the way.
But there is nothing on any chart that suggests this is anything other than a really big bear market rally. The pattern of lower lows and lower highs is still intact.
I’ve marked the 3 year cycle lows with red arrows and drawn in a line at 3 year cycle tops. So far each red arrow is lower than the last and each top has failed to move above the previous one.
In order for the dollar to end it’s bear market it will have to break that pattern. We do have a window of opportunity in the next year. If the dollar can hold above the April `08 low at the next 3 year cycle bottom then we will have half the pattern broken. It would then have to rally above 90 in order to completely reverse the secular bear trend.
However the current 3 year cycle is again extremely left translated (topped in less than 18 months). Most of the time left translated cycles move below the prior cycle low. You can see the previous two cycles were also left translated and both dropped below the previous 3 year cycle low.
Cyclically speaking the dollar is now in a weak position and the odds are greater than 50% that we will see the dollar drop below 71 sometime next year.
Also contrary to what some would have us believe sentiment on the dollar is hardly bearish. The 6 month rally has done it’s job and skewed sentiment back to the extreme bullish side of the boat. At the recent top sentiment was as bullish as it was during the brief deflationary period in `08/`09.
So for the time being it’s still a secular bear market.