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Will the U.S. Dollar Continue to Defy the Naysayers?

Look at these “double-bottoms” in large speculators’ bets against the greenback

by Bob Stokes
Updated: March 11, 2021

In early January, sentiment toward the U.S. dollar was very negative.

This quote from a Jan. 5 Marketwatch article is a sample:

The U.S. dollar fell for the first time in three years in 2020 and remains under pressure as the new year gets under way.

Even so, the very next day, our Jan. 6 U.S. Short Term Update took an independent stance and said:

Sentiment is compatible with an impending low in the [U.S. Dollar Index].

The index had hit 82.09 on Jan. 6, and as it turned out, started to climb thereafter.

However, the negative sentiment was firmly entrenched after a downtrend that had extended for several months. Hence, these two ominous headlines during the second half of January:

  • Investor bets against the dollar are at their biggest in almost 10 years (Business Insider, Jan. 18)
  • The Dollar's Crash is Only Just Beginning (Bloomberg, Jan. 25)

At the time, betting against the buck seemed almost like a no-brainer for those who take their cues from the financial news.

Yet, Elliott Wave International's flagship investor package re-asserted its independent perspective with this chart and commentary from the Feb. 5 Elliott Wave Financial Forecast:

031121frup-dollar-thmb-edit

Bearish sentiment remains extreme. Our chart plots the weekly net futures positions of Large Speculators in major world currencies other than the U.S. dollar. A declining line shows that Large Specs are increasing their bets toward a rise in foreign currencies relative to the buck. … Observe that at each of the prior dollar lows over the past 10 years, there is a "double bottom" in Large Spec. bets, as shown by the highlighted areas on the chart.

About a month later, a March 8 financial news story said (CNBC):

The U.S. dollar hit a 3-1/2-month high against a basket of currencies on [March 8]...

By March 9, the U.S. Dollar Index had climbed 12.5% since that Jan. 6 low.

Of course, pullbacks are to be expected during any rally, but the major point is that Elliott Wave International's independent analysis of the dollar has been highly useful to subscribers.

Look to our U.S. Short Term Update, part of our flagship investor package, for specific price targets.

Why the New March Elliott Wave Financial Forecast Should Be on Your Computer Screen

Why read the new March Elliott Wave Financial Forecast? A key reason is the Special Section titled:

AND NOW FOR AN IMPORTANT MESSAGE FROM THE BOND MARKET

The first chart in this section provides a multi-decade review of Treasury bond yields. Arrows "mark several key dates when rising Treasury yields heralded big tops in stocks."

Speaking of stocks, the March EWFF mentions "a key inflexion point" that investors need to review right away.

You'll also find an explanation of "abnormal behavior" in the gold market and what this behavior suggests is just ahead for the precious metal.

Follow the link below to see the new March Elliott Wave Financial Forecast on your computer screen shortly.

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