Our sister fund said:
When the USD is in a bear market, there needs to be a bloodbath before the USD can make a meaningful medium term bottom. Both of the USD’s historical bear markets went down in a straight line.
That statement was just an observation. We now have the data to back that up.
Here’s what happens when the USD falls -5% on a 1 month, 3 month, and 6 month basis (i.e. what’s happening right now).
Note that this is a bearish sign even when the USD isn’t in a bear market.
September 29, 2010
The USD Index fell another 4.5% over the next 5 weeks. Then the USD made a big bounce before resuming its downtrend.
May 18, 2009
The USD fell another 5% over the next 2 weeks. Then it bounced for 1 month before resuming its bear market.
May 4, 2006
The USD fell another 2% over the next 2 weeks. Then it made a long and shallow bounce. Then it continued its bear market.
September 23, 1998
The USD Index fell another 5.6% over the next 2 weeks. This was a bull market case. So even when downside momentum is “oversold” in a bull market, the USD still continues to go down.
June 28, 1994
The USD fell another 2.7% over the next 2 weeks. Then it made a brief 2 week bounce before resuming its bear market.
November 14, 1991
The USD fell another 5.2% over the next 1.5 months. The USD then made a big multi-month bounce before resuming its bear market.
December 6, 1989
The USD Index fell another 4.4% over the next 2 months, consolidated, and then resumed its bear market.
April 18, 1985
This was the 1 exception to all the other cases. The USD made a quick 2 week bounce after April 18 before getting slaughtered.
Expect the USD Index to decline over the next 2 weeks. Over the past 2 weeks, the USD Index has already started to react to Trump-related news (this is a fact, not our opinion). Trump’s son testifies on Wednesday.