The U.S. dollar has been falling since early-2017, as you can see from the chart below. It's completed a long-term "bear market bounce" noted as an a-b-c correction. Now the green trendline has been broken and the price has fallen below its 200-week moving average and now the 50-week moving average has fallen below its 200-week moving average, in a "death cross" formation.
Yet the media says, "The dollar is rallying". But when you really look at it, the U.S. Dollar Index has fallen from the 103ish area down to the 88ish area. So now, we're just seeing a bounce/correction of that long move down.
Now the weekly chart's RSI is grossly overbought and heading lower as the U.S. Dollar Index is butting its head up against its 200-week moving average.
The MACD continues to slump lower too. All of these are bearish signs for the dollar and show that overall, it will head lower. Could it rally a bit more short-term? It's possible. So you'll see the two most likely scenarios (in yellow) that I believe are most likely to happen.
So with the chart looking bearish, what does this mean for you? It means that you'll lose purchasing power and your dollar will go less far against products and services that become inflated.
Why would the dollar head lower? (After all, the media and some "pros" are saying its going to head higher.)
From 2011-2016, BOTH the dollar and our stock market were heading higher. Yet foreigners were having their currencies depreciate on them, while in many cases their stocks were going down on them too. But even in cases where their local stocks were going up, foreigners realized that they could make two returns: The first one would be as they converted their diving currencies over to appreciating dollars and the second return would be in our appreciating stock market. It was a turbo-charged return for them.
But now, what do we have? The dollar topped out in early-2017 and the Dow Jones Industrial Average and S&P 500 so far has topped out in January 2018. So in 2017, foreigners started losing on the currency conversion side of the equation and now (in 2018) they're losing on the stock side of the equation. Now they're doubly losing!
So foreigners have HUGE incentive to sell their U.S. stocks and convert those dollars back into their home currencies (which means "selling dollars").
Therefore as money flows out of America and back to their home countries, it causes the dollar to be weighed down. This will only get worse because many investors aren't convinced that stocks are about to dive further. Once they realize the stock market downtrend are in a full-blown downtrend, foreigners will increase their selling and get their money out of America so fast, you'd think their butts were set on fire.
I think the dollar could dive back into the 70's on the U.S. Dollar Index. I think over the next couple of years, the dollar could plummet 17% or more. That means, your purchasing power will dive by that much...or you can look at it like this: The stuff you buy would go up on average by that same percentage. Either way, it's a horrible thing when your dollar doesn't stretch as far.
The good news? You don't have to lose your purchasing power if you learn how to invest properly. So come join us in the Logical Investor newsletter at www.seanhyman.com in the Premium tab. There, I'll show you how to invest properly and how to steward your wealth and assets in a prudent, godly fashion. I'll teach you how to be a TRUE investor and how to truly think like one as well.
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