USD Index Long Term Cycles 6

I had suggested in a web posting this summer that the USD index was entering a bearish phase. Let’s look at the current Hurst phasing and what has happened since.

The long term phasing that I favor is as follows. The last 9 and 18 year nested cycle lows occurred in 1995. The last 4.5 and 9 year nested cycle low was in 2004 and the last 4.5 year Hurst low for the USD index occurred in 2009. If we go to an even longer term view, the last 36 year cycle low (ie. 1978 ) arrived very close to the last secular high in commodities in 1980.

The USD has been in a very long term decline which is punctuated with very sharp rallies, the most significant of these multiyear rallies coming off 18 year cycle lows. The last two examples are the rally from 1978 to 1985, and the rally from 1995 to 2001. Another multiyear rally is approaching for the USD, but we are not there yet IMO. If the current phasing is correct, the USD index is close to breaking down to new all time lows as the larger cycles (9, 18, 36 year) approach their nested low in the coming year.

First a look at the current 18 year cycle for the USD index. The 9 year FLD proved to be resistance as predicted this past summer. The 9 year VTL was tested but not broken materially to the upside. The USD index topped out very early in the current 4.5 year Hurst cycle in 2010. However, price quickly reversed and broke back below 4.5 year FLD. We have likely completed two 18 month cycles off the 2009 cycle low and have now entered the last 18 month cycle in this very long bear for the USD index. Both the 4.5 and 9 year FLDs are set to cap any rallies to the upside in the coming weeks and months and price should begin to start a final slide into important lows in 2013/2014. With such large cycles at play, it will be difficult to forecast an exact target for the low in terms of price and time.

A closer view of the weekly chart suggests the 18 month cycle low arrived this fall (September) . However, a bearish 20 week cycle is likely unfolding for the USD in this new 18 month cycle. If this phasing is correct and the USD resumes another leg down from here, the next 40 week cycle low for the USD should arrive by mid-2013. A break of the September 2012 low would be confirmation. Again the 4.5 and 9 year FLDs should present important resistance.

Viewing the Sentient chart from the 2011 lows and using the FLD pattern projection boxes, we see that a retest of the all time lows is due into the next 40 week cycle low for the USD index.

The current cyclic model summarizes the Hurst phasing as follows.

If the above Hurst analysis is correct, I would expect very  important lows for the USD index in 2013/2014, that being a nested 4.5 , 9 ,18, and 36 year cycle low. This approaching low should be accompanied by a secular high for commodities, and in particular precious metals could blow off into highs that could hold for many years.

If 2011 already marked this important turning point for the USD, then we should see more evidence in commodities and currencies going forward.

Look for important major trend changes for currencies, stocks and commodities in 2013 and beyond.

Happy New Year.














About SilentOne

I am a retired Chemical Engineer. I became a house dad back in 2000 and then devoted all my free time to the markets. After years of technical analysis study I decided upon Hurst cycles, which has been my primary method since 2007.

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6 thoughts on “USD Index Long Term Cycles

  • Jim Klono

    If the value of the US$ were to decrease relative to other currencies, in addition to commodities, I would also expect US equities to increase in value. Specifically, when you indicate a change in trend for equities, are you thinking bull or bear? I feel the trend is and has been bullish in that equities have not broken down. I respect your opinion and follow your every post…..Jim

    • SilentOne Post author

      Yes, I see the USD devaluation as a positive for US equities in the near term. My concluding comment refers to the idea that equities are likely to top out in 2013 as the USD begins to set its long term low. Commodities are likely to top out after equities in 2013/2014, which in my opinion will be a secular high for commodities. Thus my thought that major changes in trend are on the horizon for the USD, equities and commodities. cheers, john

    • SilentOne Post author

      hi Scott, From a Hurst cycle perspective, I believe markets saw a 4.5 year low in Nov. I was fairly certain that the Nasdaq was putting in that low at the time, but I was unsure about other markets. There will be a pullback into a 10 week low sometime in Jan. Beyond that I would take a bullish stance until signs of a significant top begin to form. Best to you for 2013. cheers, john

  • stuart mendel

    Hi John
    Where are you getting the data from? I am using DTN IQ and the data I am getting is quite different to the point of clearly breaking the downward 9 yr vtl in early 2012.

    • SilentOne Post author

      hi stuart,

      I am using DXY futures from Trading Blox. Its free and I would be surprised if the data is materially different to what you have. We did see a move into the 9 yr VTL in 2012, but I consider it more of a test in a downtrend. A true break should have held above the VTL and tested it from the upper side by now which did not happen. It’s interesting though that the USD is bouncing nicely today which is putting my bearish view to the test. Dec. likely either saw a 20 week cycle low, or something more bullish is underway. The thing is that if we are putting in an 18 month cycle low for the USD here (last one being May 2012 for the USD), it is quite late and that is not clearly bullish IMO. If the USD were in a very bullish mode, one that has put in its long term nested lows that I am looking for, it should have seen a contracted 18 month cycle for the USD off the 2012 low, and now be running in a very bullish manner. TWT. cheers, john