…The chart below shows the US Dollar Index value during the past 44 years (1972-2016). It is imperative to notice the two peak values occurred 16 years apart (1985 and 2001), when the US dollar had soared +101% and +50%, respectively. Consequently, if one assumes the 16 year cycle will indeed repeat, then the greenback may well again rise to a peak in 2017. Moreover, if we assume the US$ could rise the average of the two previous peaks, then we might see it peak next year (2017) to +75%.
The comments above and below are excerpts from an article by I.M. Vronsky (gold-eagle.com) which has been edited ([ ]) and abridged (…) to provide a faster and easier read.
Based upon the above data and 16-year peak cycle assumption, we estimate the US Dollar may again peak to about 127 sometime in 2017. (Historical Note: The last time the US Dollar Index was 127 was during the 1980s recession)
Contrarily, in the event the US$ rises late this year and well into 2017, the EU currency most likely have dropped to about its 2001-2002 low support at 85.
Drivers of a Rising US$
- Rising US interest rates – sooner or later the Fed will raise rates attracting international investors.
- Impending collapse of Euro Union and euro currency will cause investors to flee to safe havens. Needless to say, the implosion of the Euro currency will cause a panicked stampede of millions of Europeans to the US dollar…thus vaulting the latter’s value into the stratosphere.
- Continued BREXIT effects — and even a possible GEREXIT (i.e. Germany abandoning the EU).
- Crashing stock markets worldwide – especially in the EU (STOXX600) and Asia (Shanghai Index).
- Major world banks are close to bankruptcy – and their share prices are relentlessly plummeting toward zero. Consequently and eventually, their depositors will flee the euro, yuan (renminbi), Swiss Franc and Yen…and stampede to the safe haven of the US Dollar, which is and has been the world’s Foreign Reserve Currency for many decades…
- In a recession, inflation is likely to fall. Lower inflation will help the country become more competitive and this may increase demand for the currency causing it to rise. Consequently, during periods of US recession, the US$ usually rises. In early 1980s, the US went into recession, but during this period the value of the Dollar rose. Ergo, economic recession usually strengthens the US$.
- A Donald Trump Presidency will likely strengthen the US greenback.
- Technical Analysis patterns demonstrate bullish trends…
All the above will materially increase the demand for the US greenback, causing its value to strengthen vs other currencies.