go up, it attracts money to a currency and when interest rates go down, it encourages money away from the currency and into other higher yielding currencies. And, in general, that's true.
However, just knowing the "textbook" cases will never ultimately make one successful in their assessment of the dollar. Why? It's because there are plenty of times when it doesn't follow the philosophies laid out in the textbooks. (It's one reason why professors, many times, make horrible investors).
Just a few years ago, we were in an interest rate lowering environment and the dollar went up and now we're in an interest rate hiking environment and the dollar is falling. It's doing the opposite of what these professors have taught their students.
But real-life investing experience teaches you that when an asset does opposite of what it's technically supposed to do, it's a really contrarian sign (in this case, a very bearish sign for the dollar). Let's take a look at the chart below.
The dollar peaked just before the calendar turned over to 2017. Then it broke its (green) uptrend line early on in 2017. Around the same time, it broke below its 50-week moving average and that moving average began to curl downward.
Lately, the price of the U.S. Dollar Index has dropped below its 200-week moving average and below the key level of support that's held for several years now, around the 91-93ish area.
Now I can't say that the dollar can't get a "beark market bounce" higher sometime soon...but when the bounces higher continue to hold below the 200-week moving average and below the 91 level, you'll know "the shift" is underway.
The RSI and MACD allude to this coming. And at this time, the index is below that support zone. However, above, you'll see two scenarios (in yellow) that I think are the most likely scenarios for the dollar going forward.
I believe, overall, it's going to continue to drop and head back towards its historic lows found on this 10-year chart. As that happens, it's going to turbo-charge the returns of assets like: gold, silver, gold mining stocks, platinum, foreign currencies and commodity-related stocks.
As that happens, its very likely that money is going to flow out of the broader stock market and into these areas mentioned above.
Additionally, foreigners that ran to the U.S. stock market in year's past because of its superior performance relative to their home stock markets will begin to flee our market as they continue to get whacked on the currency exchange rate (when they convert back from dollars to their home currencies).
Before, they were gaining on BOTH the stock's appreciation and the exchange rate. Now they're losing on the exchange rate and soon they'll be losing on their overall stock appreciation as well. As this happens, they'll leave our market like their butts were set on fire. And that will cause the dollar to dive even faster and these other assets mentioned to rocket ever-higher!