Data &
Technology
Research
Reports
Report Solutions
Reports Library
Actionable
Strategies
Free
Resources
Simple Backtest Calculator
Simple Seasonality Calculator
The Kelly Criterion Calculator
Sentiment Geo Map
Public Research Reports
Free Webinar
Pricing
Company
About
Meet Our Team
In the News
Testimonials
Client Success Stories
Contact
Log inLoginSign up
< BACK TO ALL REPORTS

One More Reason to be Concerned about the Dollar

Jay Kaeppel
2021-06-01
The price movement for the U.S. Dollar is much more cyclical than most traders realize. Given this, it may be useful to note that the dollar is about to enter a historically unfavorable period.

The U.S. Dollar has been in a pretty prolonged slump since spiking to a top in March of 2021.  Any chance for a rebound?  Sure, there is always a chance.  The buck is pretty oversold, and trader sentiment - a contrarian indicator - is pretty darn negative.  So, a "bounce" would not be entirely unexpected.

Still, a strong argument can be made that the dollar is in the midst of a longer-term decline.

THE U.S. DOLLAR 16-YEAR CYCLE

I read some years ago about a 16-year cycle for the U.S. dollar.  Unfortunately, I can't remember where I read it, so I cannot give proper credit. The first full 16-year cycle - by my account - began on 3/31/1969 with an 8-year bearish phase, followed by an 8-year bullish phase.

  • The "bearish" phase ran from 3/31/1969 through 3/31/1977 
  • the "bullish" phase ran from 3/31/1977 through 3/31/1985
  • And so forth  

Figure 1 displays the cumulative % growth achieved by holding a hypothetical long position in the U.S. dollar during all bullish phases (black line) and bearish phases (blue line).

Figure 2 displays the results by the numbers.  

The latest phase - a bearish phase - began on 3/31/2017 and runs through 3/31/2025.  Does that mean the dollar is doomed to decline relentlessly for another 4+ years?  Not at all.  However, it does tell us that it may be wise to favor the bearish side on any trade involving the U.S. dollar.

DIGGING A LITTLE DEEPER

Historically the most challenging time for the dollar is during June through December, when the 16-year cycle is in a bearish phase.

The chart below displays the cumulative % growth achieved by:

  • Holding a hypothetical long position in the U.S. dollar 
  • ONLY during June through December 
  • During those years when the 16-year cycle is bearish 

The next iteration of this particular "phase" begins on June 1st of this year and extends through December 31st.  

The table below displays the year-by-year results (i.e., the % gain/loss for the dollar during June through December ONLY during those years when the 16-year cycle is bearish).

This seven-month unfavorable period within the larger 8-year unfavorable period has shown:

  • A gain 8 times
  • A decline 20 times
  • A 29% winning percentage

WHAT TO WATCH FOR

As you can see in the chart below (courtesy of Profitsource by HUBB), the dollar is nearing an important support level.

If the dollar breaks down through this level, then - based on the data above and the usual annual seasonal trend shown in the chart below - another significant down-leg becomes a strong possibility.

SUMMARY

There is absolutely nothing that requires the U.S. dollar to adhere to the 16-year cycle detailed above.  But history suggests that getting bearish during the bullish 8-year phase and/or getting bullish during the bearish 8-year phase typically involves being willing to "swim upstream."

A large part of any investment success is "identifying the flow" and "going with the said flow."  The dollar will remain in a bearish phase through March 2025.  Therefore, history suggests that June-Dec of 2021, 2022, 2023, and 2024 may be a time to consider a bearish position regarding the buck.

Sorry, you don't have access to this report

Upgrade your subscription plan to get access
Go to Dasboard
DATA &
TECHnologies
IndicatorEdge
‍
BackTestEdge
‍
Other Tools
‍
DataEdge API
RESEARCH
reports
Research Solution
‍
Reports Library
‍
actionable
Strategies
Trading Strategies
‍
Smart Stock Scanner
‍
FREE
RESOUrCES
Simple Backtest
Calculator
Simple Seasonality
Calculator
The Kelly Criterion
Calculator
Sentiment Geo Map
‍
Public Research Reports
‍
Free Webinar
COMPANY
‍
About
‍
Meet our Team
‍
In the News
‍
Testimonials
‍
Client Success Stories
Pricing
Bundle pricing
‍
Announcements
‍
FAQ
© 2024 Sundial Capital Research Inc. All rights reserved.
Setsail Marketing
TermsPrivacyAffiliate Program
Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

Testimonial Disclosure: Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.