US Dollar To Fall To All-Time Lows By Mid-2020’s

Chief Analyst & Founder @ iGold Advisor
May 12, 2021

federal reserve notes

The US dollar is set to decline toward all-time lows against major foreign currencies by the middle of the decade.

The result of trillions of freshly-created dollars by the Federal Reserve for Coronavirus stimulus programs and bailouts is going to be felt primarily in the form of an inflationary tidal wave, i.e. a currency devaluation. As the world’s reserve currency, the US dollar devaluation will be felt all around the world. However, its impact will be especially noticeable here in the United States.

Both savers and investors should be positioning themselves now – ahead of the inflation – into real assets such as gold, silver, real estate, and commodities, for protection against the devaluation to come. Just as in a tsunami, if one waits until the wave is already being felt, it will be too late to avoid harm. The time to protect oneself from devaluation is now.

US Dollar Breaks Down

As a result of the trillions of dollars created out of thin air by the Federal Reserve over the last year, the US currency itself is starting to lose value. The evidence for the US dollar’s devaluation can be observed by studying what matters most: its price.

Below we can observe the multi-decade trend break for the US dollar index (USDX), which compares the greenback to a basket of major world currencies:

Important considerations for the US dollar:

  • The dollar broke through its 12-year rising trend (magenta) in late-2020 (red callout). This trend break shows us that the preceding years of the dollar advancing against its foreign currency counterparts has come to an end.
  • Following multi-decade trend breaks, we do not expect an asset to collapse immediately. In this case, what we have observed over the past four months is a dollar rally to retest the broken trend (red callout). A retest is when a market rises back up to a former breakdown point, in essence daring the former sellers to show up once again as they did some months prior.
  • In this case, in March 2021, sellers for US dollars indeed showed up again as they did the previous year, thus causing the retest to fail to recapture its former trend (red callout).
  • Following a multi-decade trend break and a failed retest, the next expectation is to see the dollar fail at its horizontal support band between 88.5 – 89.5 on the index. This support band dates back to 2008. The 88.5 – 89.5 region for the US dollar served as resistance no less than three times from 2008 – 2010, and has served as support twice since.
  • The dollar closed at 90.2 on the index last week. This puts it 1.7 points above the lower boundary of the support band at 88.5. We expect on this pending third test of support, the US dollar is going to fail to hold the support zone.
  • Upon a failure at the 88.5 support, the target for the US dollar will become 74.0 (green). This target is defined by a measurement of the entire amplitude above the support band (14.5), subtracted from the pending breakdown point (88.5).

Euro Break Out Confirms Dollar Weakness

For further evidence that the dollar is set to embark upon its next leg lower, we need look no further than the euro to US dollar cross-pair (EUR/USD).

The euro is the largest component of the dollar index at over 50%. Thus, we should expect that in whichever direction the euro moves, the dollar index is generally going to move in the opposite.

Below we show the short-term price action for EUR/USD:

Important points:

  • The euro has just broken out against the dollar (red callout) by closing above 1.21 for the week.
  • A valid rising trend (blue) still exists in favor of the euro, which began in March 2020.
  • We expect the euro to begin a two-steps forward, one-step backward advance, which should bring it above the 2020 peak (1.23) by Q4 2021.
  • After breaking the 2020 peak at 1.23, there will be nothing but “blue sky” for the euro until the former all-time highs, in the region of 1.45 – 1.60, which were recorded from 2008 – 2011.

Gold and Silver to Act as Beneficiaries

Amidst a falling US dollar, we expect that gold and silver, which are priced in US dollars around the world, will act as primary beneficiaries. Other potential beneficiaries will include tangible commodities and real estate in fairly-valued (i.e. non-bubble) markets. In essence, most assets with a finite supply should benefit amidst a currency devaluation. However, throughout history, gold and silver tend to be the best performers when the currency loses significant value.

The time for investors to protect themselves is now, before the currency devaluation outlined above manifests.

At www. iGoldAdvisor.com, we are now positioning clients to not only protect themselves, but also to profit from the currency devaluation ahead.

Just as in storm, if one waits to seek higher ground until the full force of the winds are being felt, it is generally too late to avoid damage. Seek shelter now.

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Christopher Aaron began his career as an intelligence analyst for the CIA and Department of Defense. He served two tours to Afghanistan and Iraq between 2006 - 2009, conducting pattern-of-life mapping for military leaders.

Mapping shares similarities with technical analysis of the financial markets because both involve the interpretation of repeating patterns found in human nature. He is the founder of iGold Advisor, providing independent research and analytics on all aspects of the precious metals markets.

He speaks regularly on the cyclical patterns found within the financial markets and on international policy. He has been featured in the New York Times and NPR news amongst other financial publications.

www.iGoldAdvisor.com


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