Monday, 9 March 2015

US Dollar bull markets - how long do they last?

I did a little research into the following  question: 

US Dollar bull markets - how long do they last?

Now we are in the zone of all the US dollar top callers who only a year ago were saying that the dollar bear market was going to restart while the dollar was under 80. Now it is 97 and they are already calling the top.

I thought that I would look at the long term US dollar chart here (10th chart from the top):

I have edited is as follows:

How wide are the bull markets? I looked at the width of these bull market peaks that occurred around 1985 and 2001. How long is it from the breakout to the time when the dollar index came down again to that level?

From the start of the breakout n(green circles), the peak widths were 5.7 and 6.7 years. This time the dollar broke out in mid-2014 at 80+ on the index, so one might expect that 80 level to remain exceeded until at least the start of 2020 and it may be early 2021.

I also looked at the width at half height of the peaks in the dollar which is a common thing to do in science.

This place halfway up the peak is during the second major leg up in the dollar in each bull market after there had already been a post breakout correction and a second breakout (purple circles). The widths here were 2.2 and 2.9 years. That would take us at least from now until mid-2017 until we even get down to where we are today at 95+. However we haven't even had a correction in this uptrend yet.

How long was it from the breakout in the dollar index to the peak in the last two dollar bull markets?

Well in 1985 it was 3.9 years and in 2001 it was 4.9 years. So starting in mid-2014 the next dollar peak might be expected between early 2018 to early 2019.

The distance from halfway up the bull market to the top in each case was 1.7-2.2 years. If we are halfway up the present USDX bull market right now (which is debatable), the peak could be expected in late 2016 to early 2017.

The breakout in this dollar bull is much stronger than in the 1992-2001 bull and much more like the 1980-1985 bull, which coicidentally was also accompanied by a sustained rise in US oil production and fall in oil imports. This time the USDX has also rocketed through the top line of a huge falling wedge.

Looking at these charts, historic precedent suggest a dollar top between late 2016 and early 2019. This is also in the zone of a potential peak in shale oil production. It also sugests that it will be between mid-2017 and early 2021 before the dollar bull market is well on its way down.

There is plenty of room time wise for the dollar to continue its increase given past performance.

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