Timing of the Dollar Meltdown

September 12, 2024

Source: Clive Maund (9/10/24)

Technical Analyst Clive Maund shares his thoughts on the current state of the U.S. Dollar and how it might impact the gold market. 

Because it has such massive implications for just about everything, today we are going to review the charts for the dollar index.

Starting with the long-term 20-year chart, the first point to make is that, given the rampant money creation by the Fed and the grim economic and geopolitical outlook for the U.S., it is remarkable that it has held up as well as it has, which is believed to be largely due to debt servicing by horribly indebted foreign countries saddled with massive dollar debts.

However, the BRICS and the Global South are moving away from the dollar at an increasing pace. The U.S.’s huge debts, coupled with the Fed’s manic money creation, will completely destroy the dollar, which will end up like the currencies of Venezuela and Zimbabwe. So, returning to our chart, what is expected to happen is that the dollar breaks down below the support at 100 and plummets, with the first downside target being the support in the 88 – 90 area. However, there may be a near-term rally before this happens for reasons that we will see when we look at the dollar’s shorter-term charts.


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On its 5-year chart, we can see that the dollar accelerated into a parabolic blowoff top in 2022 that is thought to mark the final high, the breakdown from which led to a large trading range forming, which has been going on for about 18 months now.

Normally, following a breakdown from such a parabolic blowoff top, a trading range of the type that has just formed is a consolidation that leads to renewed decline, and we can certainly see for fundamental reasons why this would be.

Over the past couple of months, the dollar has dropped back to quite strong support at the lower boundary of the range, which it arrived at in an oversold state with the 6-month chart that we will look at shortly suggesting some sort of rally soon off this support. However, over the longer term, it looks set to break below this support and drop hard. If this scenario eventuates, then it will present a golden opportunity to add to PM sector positions on a dip ahead of renewed advance that is expected to be powerful.

On the 6-month chart, we can see how the dollar has accelerated into a low at the support, where it bounced with its MACD breaking clear above its moving average in a manner that indicates that it has probably bottomed for now. It retreated back towards this support last week, with Friday’s candle suggesting that it is making a small Double Bottom.

It, therefore, looks likely that it will rally from here, although any such rally is not expected to get very far, probably no further than about 102, before the dollar reverses to the downside again and goes on to breach the support and drop hard to the next significant support in the 88 – 90 zone.

Gold has been added to this chart (and the others) and you can that it is looking a bit frail here after its recent runup. If a short-term rally in the dollar does occur and the PMs get knocked back more it will be regarded as a very good opportunity to buy or add to positions accross the sector.

Coeur Mining Inc. (CDE:NYSE)

You may recall that a near-term top was called for the broad market in the BROAD US MARKETS update on August 30, and so it proved to be, and the example PM stock included in that update, Coeur Mining Inc. (CDE:NYSE), has dropped back towards its 200-day moving average as predicted. If we do see a short-term dollar rally, it may, of course, synchronize with temporary risk-off conditions, meaning that the broad market is likely to drop further, and as a result, PM stocks could drop further, too, bringing Coeur down to a Buy zone near to its rising 200-day moving average and of course other PM stocks too.

At this juncture, we can expect the Fed to indulge in another binge of money creation that reverses the stock market back to the upside.

 

Important Disclosures:

  1. Clive Maund: I determined which companies would be included in this article based on my research and understanding of the sector.
  2. Statements and opinions expressed are the opinions of the author and not of Streetwise Reports, Street Smart, or their officers. The author is wholly responsible for the accuracy of the statements. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Any disclosures from the author can be found  below. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
  3. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.

For additional disclosures, please click here.

Clivemaund.com Disclosures

The quoted article represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maund’s opinions are his own, and are not a recommendation or an offer to buy or sell securities. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund’s opinions on the market and stocks cannot be  only be construed as a recommendation or solicitation to buy and sell securities.

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