The US Dollar has been quite weak since the beginning of last year. Will it continue to weaken?
The monthly chart below shows my long-time main Elliott Wave count for the US Index, an unfinished ending contracting diagonal starting at the 1985 high. This wave count correctly expected the US Dollar to top near a .618 retracement of the downward wave from July 2001 through March 2008. That top came in early January 2017, and the Dollar has surprised many by moving strongly lower ever since.
Hurst cycle analysis also correctly projected that top, and from a long-term perspective is quite bearish the Dollar moving forward, potentially all the way to the year 2027.
(Click on the charts to enlarge)
Moving a bit closer to the most recent price action, the weekly chart (below) shows a clear five-wave structure to the downside from the Jan 2017 top. That structure may be complete at the May 25 low, or may need to stretch a slight bit lower so that wave 5 blue will equal the net traveled by waves 1 through 3 (blue) times .618, a very common relationship within a 5-wave impulse. The Fibonacci target zone for the end of blue wave 5 is between 87.23 and 87.71, depending on whether a linear or semi-log chart is used. The low so far was 88.44 on Jan 25.
After a 5-wave non-overlapping impulse is complete, price will typically retrace back the extreme of the wave 4 at one lesser degree. So, the next large move in the US Dollar Index is likely to be to the upside, back to 95.15. The Hurst nominal model is currently expecting the US Dollar to form a large cycle trough about now, followed by upward movement into early June 2018. That timetable fits perfectly with the Elliott wave count as described above and shown on the daily chart below.
Of course, if the Dollar strengthens over the next 4 months, there will be intermediate-term negative ramifications on many commodity prices. But once the natural retracement is over, both the wave count and Hurst analysis expect the Dollar to move much lower, and that means commodities strongly to the upside at that time, especially Gold, which is not tied to economic expansion.
Sid Norris – ElliottWavePlus.com