close icon

USD Index Will Not Rise Forever

It has been another strong year for the U.S. dollar. The greenback crushed most of its rival – the euro and especially the pound, to mention a few – so there is no surprise the USD index is hovering near 101.00. The last time the USD index traded around these levels was over 13 years ago – in 2003 – which comes to illustrate just how exceptional the dollar’s rally really is. However, what traders and investors are most interested in, is not the past, but the future, and what is left of that uptrend. Judging from the Elliott Wave analysis of the weekly chart below, not much.
usd index-13-12-16
The weekly chart visualizes the entire behavior of the USD index since the low of 70.70 in March, 2008. We will now focus on the last phase of that recovery, which began from 72.70 in May, 2011. As visible, the impressive surge between that level and 102.05 so far could be seen as a five-wave impulse, whose sub-waves are labeled (1)-(2)-(3)-(4)-(5). Wave (5) is still under construction so higher levels could still be expected. The problem is that according to the Wave Principle, every impulse is followed by three-wave correction in the opposite direction. No matter how we label the surge since 2011 – as wave I or wave (C) – once its fifth wave ends, a decline to at least the support of wave (4) of I/(C) should be anticipated. In terms of price, this translates into a decline to 92.00. If the current uptrend is in its wave (C), the following selloff could be much larger, but we cannot know that right now. The bearish outlook is also supported by the Relative Strength Index, which shows the typical divergence between waves (3) and (5) of I/(C) – another reason not to bet your house on the dollar.
Then, the question is what is left of wave (5) of I/(C)? In order to find out, we need to go into the details and see a daily chart of the USD index.
usd index-daily-13-12-16
Ideally, wave (5) should also be an impulsive pattern. Right now, it does not look like one. Wave 3 is still not over and waves 4 and 5 of (5) also remain to be drawn by the market, before the bearish reversal could occur. In other words, we might see the USD index above 103.00 in the short-term, but overall, the trend since 2011 is approaching its end. Nothing lasts forever.

Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

DJTA: Putting 50 Years of Data in Elliott Wave Context

Just six months ago, it felt as if the world was coming to an end. People in Europe and the USA were stockpiling necessities in preparation to isolate themselves for an unknown time period. The coronavirus panic had dragged stock market averages down 35-40% in just a month. It was the fastest plunge into a…

Read More »

DAX 30 Surged 50%+ in Three Months. Here is Why

THIS WEEK ONLY, in addition to the seven premium instruments, all our subscribers will receive ONE Elliott Wave analysis of DAX 30 as a BONUS. Subscribe NOW and get yours on Sunday, June 14th. The last time we wrote about the German DAX 30, the index was in a free fall. It was March 2nd…

Read More »

Elliott Wave Setup Sends S&P 500 12% Higher

As demonstrated in our previous article about the S&P 500, the stock market started climbing while the economy looked the weakest. Then, as the markets kept rising, a new conundrum occurred. How to explain the extremely wide disconnect between the stock market and the economy? GDP forecasts for Q2 are all over the map, ranging…

Read More »

Insurance ETF Nearly Halves As COVID-19 Takes Toll

Maybe only with the exception of grocery stores, one can hardly find a stock not suffering from the COVID-19 disaster. Insurance companies were not spared either, so it is no surprise that the SPDR Insurance ETF (KIE) crashed, as well. This ETF, which ranks Progressive and Brown & Brown among its top holdings, lost 46.1%…

Read More »

Another Nightmarish Week, Another Illogical S&P Surge

As COVID-19 spreads across the U.S., the economy is teetering on the verge of collapse. Initial jobless claims came in at 6.6 million yesterday, bringing the three-week tally to nearly 17 million. The unemployment rate is estimated to have already surpassed its 2008-2009 recession level. Economists at Goldman Sachs, Morgan Stanley and the IMF predict…

Read More »

S&P 500 Elliott Wave Analysis Giveaway

The S&P 500 crashed by as much as 35% in just one month. And while the coronavirus outbreak was totally unpredictable, the crash it caused made perfect sense. Elliott Wave is our favorite method of analysis, but as the market kept rising we decided to back it up with fundamental data. The result was a…

Read More »

S&P 500, Against All Logic, Re-Enters Bull Market

The coronavirus pandemic forced the global economy to grind to a halt. Major U.S. stock market indices made their fastest plunge into bear market in history. In less than two months, DJIA and the S&P 500 lost 38.4% and 35.4%, respectively. “The virus is just starting to spread in the United States, the market is…

Read More »

More analyses