Wednesday, 11 November 2015

Breakout from long term US dollar bear market since 1971?

I have asked Rick Ackerman on blog what he thinks about the possible reversal of the generational downtrend in the US dollar.

For 45 years, we have had typical US dollar bull and bear market cycles:

8 years down 1971-1979
6 years up 1979-1985
7 years down 1985-1992
9 years up 1992-2001
7 years down 2001-2008
9 years up? 2008-2017?

That is about an average 8 year bull and bear cycle.

In this interview,

It sounds like Rick is forecasting that the last 45 years action in the US dollar with lower lows in every cycle is not going to be followed and the normal cycle is going to break.

In that case, it seems that it might be more likely to break to the upside if he says the up-cycle will continue for another 5 years, that gives a dollar top in 2020 and a 12 year bull market in the dollar!

The reason for this could be that we are in a once in a century deflation event like the one in the 1930s. So perhaps we shouldn't expect the dollar index to behave as it has in the past 45 years because they are irrelevant to the current events

This has all kinds of implications:

One might be that the dollar could have turned up into a secular generational bull market in a break from the past 45 years of its making lower lows.

It also would imply secular bear market in the Euro contrary to European currency strength versus the USD in recent decades. Perhaps it would go hand in hand with disintegration of the Euro and the European Union whose integration was coincident with its generational bull market ending in 2008.

It could also imply deflation and a long period of it, not atypical in a credit contraction after an exceptional financial bubble.

That might put an end also to the commodities cycles that tend to run inverse to the US dollar, so perhaps the commodities bear market has further to run and looking at recent lows like the 2008 lows or 2001 lows in commodities as a guide is irrelevant.

It might also imply that there will be no continuation of a secular gold bull market perhaps for many years but perhaps some kind of trading range at relatively subdued levels for many years.

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