King Dollar on Election Day

• Posted by Greg Harmon
• on November 8th, 2016

The US Dollar Index started a run higher in July 2014. After peaking just over 100 in March 2015, 8 months later, it settled into a holding pattern. Since then it has bounced between 93 and 100 for nearly 20 months! Running into this period I had noted that the Dollar had tended to move in 7 year cycles. 8 months was hardly a 7 year cycle. So is it just taking a breather on the bench like an NBA star in November, waiting for the real season to start in January?

If not January what might the Dollar be waiting for? Many signs point to the election. Fed watchers are keen to point out that the FOMC was bound to wait until after the election to raise rates again. The rhetoric from Fed speakers seems to point to a hike at the December meeting now. After the election. The charts tell a similar story.

The chart above shows the US Dollar Index over this time period. The back and forth motion has worked out to a move higher that started in October. That peaked at the end of the month and led to the recent pullback. It found support when it hit the lower Bollinger Band® and turned sharply higher Monday. Now, Election Day, it is continuing.

A measured move gives a target to the top of the channel at 100.40. With symmetry that would happen at the end of November. Then a push higher into December and into 2017? We will have to wait and see for that. For now it looks like the top of the channel is in the eyesight.

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