I got up very early this morning to review the USD Index and prepare this update. It has been a while since my last post and I am still very busy with home reno projects.
The last time we looked at the USD Index, it was forming an 18 month cycle trough, which did arrive May/June last year. This coincided with a topping process in many world markets. Commodities have since come of in a big way. So what lies ahead? The following assumes that the long term phasing discussed in this thread is correct. If for some reason the longer cycles have bottomed (ie. 4.5 and 9 year Hurst), then a much more bullish picture is likely to emerge for the USD. I'm in the bearish USD camp for now.
Since the last post at the 18 month low, the USD Index has not done a whole lot. This despite terrible volatiltity in commodities and gold etc, and weak world markets in general. I am watching the USD now closely to see just when the bearish trend will reassert itself for the USD. Here's why.
The larger Hurst cycles for the USD Index, the 4.5 and 9 year, are now pointing down. The last 4.5 year low arrived in late 2009. The last 9 year low arrived in late 2004. Here is the long view.
[attachment=3]30 year chart 4.5 and 9 year cycles.png[/attachment]
The USD Index is now getting very overbought and it is getting late in the current 18 month cycle.
On the long view, the USD Index has yet to take out its 4.5 and 9 year FLDs to the upside.
[attachment=2]DXY Futures May 2012 NM troughs start 95 ST monthly.png[/attachment]
If we are looking for bearish signposts from a Hurst perspective, there are plenty. If the current phasing is correct, the 18 month, 4.5 and 9 year cycles are pointing down at this time. The 18 month FLD was crossed to the upside in Dec. 2011 and yielded a price objective of ~85 which so far has not been met. Perhaps we will see a spike low for the Euro in June, but until then the USD is showing weakness not having met the 85 target.
[attachment=1]DXY Futures May 2012 NM troughs start 95 ST 18 mth FLD.png[/attachment]
I expect an important low for markets in June. This is potentially only a 40 week Hurst low for most markets, but in my view it is likely to be more than that. If the USD is about to turn down and head into the next 18 month cycle low, markets should be supported by this and rally into the autumn of this year. This may lead to a contracted 4.5 year Hurst cycle for the $SPX and many world markets.
[attachment=0]DXY Futures May 2012 NM troughs start 95 ST monthly 4.5 year cycle.png[/attachment]
TWT. I would be very cautious of being too bearish equity markets once the 40 week has been seen.
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