The expectation that the Federal Reserve will resume cutting rates after having cut the Fed Funds target three time last year has finally helped the stock market rebound today after five straight days of losses in the Dow and S & P 500 index in the last week of February.
The dollar index, thanks to the strong euro, is down close to 1% at around 97.20 while the Dow is up just under 600 points or around 2.2%. Even though the ECB is expected to cut its negative rate by maybe 10 basis points the Fed has a lot more room to cut and this what is probably driving the euro higher versus the dollar today.
We at maneco64 have noted that the dollar index topped in January 2017 at 103.82 and that we expect that the current long term cycle for the dollar index is lower and that it will probably bottom in seven to nine years from the top in 2017. Check the chart below for a visual picture of the cycle.
So with the apparent short term failure in the dollar index we think the cycle top from January 2017 is still valid so even though the dollar index is still significantly higher than its 2008 low gold is actually almost $600 higher than its top at $1032 in March of 2008.
So to conclude, we think it is the dollar's turn to make new lows versus gold and for gold to break through the all-time high from 2011 like all the other major fiat currencies have done so far up to now.
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