Since Donald Trump’s election win in November – a total shock to many investors, but an outcome I forecast well in advance – the U.S. dollar has soared through the roof. In fact, it has been one of the strongest moves in decades, but the buck fell sharply to start this week.
Ironically, the catalyst for the dollar correction is … Trump himself!
In case you missed it, Trump went on record with The Wall Street Journal saying the dollar is “too strong.” He went on to say the value of the dollar is too high, in part because China manipulates the value of its currency lower, and that’s true.
But every other nation on the planet does the exact same thing; periodically talking down the value of their currencies, too, in order to secure a competitive advantage for trade.
The European Central Bank is doing everything in its power to water down the value of the euro.
The Bank of Japan has for years been manipulating the yen lower against the buck.
So it’s no surprise that Trump now takes his turn at talking down the dollar’s value as he postures for potential trade wars to come.
A big part of the reason for the pullback is simply a normal correction after such a strong upside move in the buck. No market goes up in a straight line. In fact, I have been expecting just such a breakdown in the buck’s rally, based my Artificial Intelligence (AI) cycle forecasts.
Below is a recent chart, which I sent paid-up members of my Real Wealth Report just last month, accurately calling for a top in the dollar…
Almost right on cue, the forecast cycle turn date looks like it’s in place already, at a high of 103.81 in the U.S. Dollar Index, a few weeks ahead of schedule.
After such a strong run higher from mid-2014 to the end of last year, a pullback in the buck is way overdue, and it could prove to be a sharp correction. You can see in the chart above, the correction should stretch out into late May, with the euro and yen enjoying a nice bounce against the buck over the same time frame.
But don’t make the mistake of becoming a perma-bear on the buck, because after mid-year the dollar should rise again, dramatically.
By then we’ll have plenty of details about Trump’s plan to lower corporate tax rates, which is very likely to trigger massive capital inflow into the dollar as U.S. multinational companies scramble to take advantage of lower rates to repatriate profits earned, and held, overseas.
The exact timing of the next leg higher for the dollar could be tricky however, so don’t jump the gun. There is still plenty of uncertainty about the incoming Trump administration and his policy proposals.
Plus, the prospect of trade disruptions could likewise impact the exact timing of the buck’s next bull move.
But rest assured, I’ll be updating subscribers to my Real Wealth Report about every twist and turn along the way, and giving them actionable trade recommendations to profit from the moves. Stay tuned.
Best wishes,
Larry
christopher nguyen March 21, 2017
Thank you very much Larry Edelson you are the best of the best adviser I respect the most because you care for us like a family even you go away from us. You still think for us and finish a last gift for us. I been learn alot of thing from you even Im new in trading stock plus you give us all the chart silver, gold,dollar, oil,dow,bond that help us alot.Your last gift you give it to us is so much avalable even I just view to look over but I can tell you work very hard just want to complete and give it to us before you gone all I can say god bless Larry Edelson and family.We ll lose you for now on but we never lose what you did and care for us. Thank You
Jim M January 26, 2017
Larry,
Now that Trump is in the White House actively pushing more American business, political and economic
initiatives he promised in the campaign, will the dollar strengthen, rather than weaken? Pls. give us an
update on the dollar.
Jim M January 26, 2017
Larry,
Now that Trump is in the White House actively pushing more American business, political and economic
initiatives he promised in the campaign, will the dollar strengthen, rather than weaken? Pls. give us an
update on the dollar.
D Garbett January 19, 2017
Thanks for all you news and insights,, really appreciated
D Garbett January 19, 2017
Thanks for all you news and insights,, really appreciated
Daley January 18, 2017
Thanks for the insight Larry.
Daley January 18, 2017
Thanks for the insight Larry.
Dave S. January 18, 2017
Larry, as clear as day, the AI dollar “gift” chart you sent us on 1/6/17 shows a LOW at the beginning of Jan ’17, then also as clear as day an unbroken rise all the way to the start of April. I realize the time scale is much different on that chart and the above chart, but still, they seriously contradict each other.
What gives?
And if you really think the dollar is going to be pummeled here (although which currency in the basket of currencies do you think will strengthen to make the dollar sink?), why are you not advising that we buy miners?
Dave S. January 18, 2017
Re $ strength, I see you mentioned a bounce in the yen and euro. My mistake.
Dick Lund January 18, 2017
So Larry let’s pull the trigger, dollar down gold up. Come on. Do it. Dicky
Dennis Smith February 13, 2017
I would like to see your comment on gold also.
Dick Lund January 18, 2017
So Larry let’s pull the trigger, dollar down gold up. Come on. Do it. Dicky
Dennis Smith February 13, 2017
I would like to see your comment on gold also.
Steve Stevens January 18, 2017
As the US Fed raises rates the ECB and BOJ will have room to raise rates from NIRP to ZIRP. Also, I have noticed what appears to be Asia (China) exchanging dollars for Gold with the impact of driving the dollar down and Gold up. Expect next 6 months to have a lot of uncertainty which drives gold higher.
Steve Stevens January 18, 2017
As the US Fed raises rates the ECB and BOJ will have room to raise rates from NIRP to ZIRP. Also, I have noticed what appears to be Asia (China) exchanging dollars for Gold with the impact of driving the dollar down and Gold up. Expect next 6 months to have a lot of uncertainty which drives gold higher.
Steven Christie January 18, 2017
It’s going to get ‘lively’ over the next couple of years. You have been writing about this historical turning-point period for quite some time now.
Steven Christie January 18, 2017
It’s going to get ‘lively’ over the next couple of years. You have been writing about this historical turning-point period for quite some time now.
ChinaWildMan January 18, 2017
Find out why the other currencies all want to be valued less than the USD.
https://www.youtube.com/watch?v=DyV0OfU3-FU&list=PLE88E9ICdipidHkTehs1VbFzgwrq1jkUJ
Gordon Haw January 18, 2017
Larry, the Chinese used to manipulate their currency down to obtain a trade advantage; however, during the last few years they have done the opposite, keeping it overvalued and tied to the dollar. That’s why they are bleeding reserves. The Chinese people know it is overvalued and want to get out before they devalue or float, which could happen shortly.
Gordon Haw January 18, 2017
Larry, the Chinese used to manipulate their currency down to obtain a trade advantage; however, during the last few years they have done the opposite, keeping it overvalued and tied to the dollar. That’s why they are bleeding reserves. The Chinese people know it is overvalued and want to get out before they devalue or float, which could happen shortly.
joan casson January 18, 2017
RE THE DOLLAR CORRECTION. So what should we do with our RW positions in euo?
joan casson January 18, 2017
RE THE DOLLAR CORRECTION. So what should we do with our RW positions in euo?