The downtrend for the U.S. dollar in 2017 has been vicious, and it’s about to get a lot worse. The dollar index (DXY) just closed its fifth straight month of losses, its longest losing streak since 2011.
Heading into a now guaranteed debt ceiling and U.S. Government budget crisis in the fall, we expect the dollar to ultimately fall below its strongest level of support of 92.5 on the DXY index.
For the short-term, here in August, it looks like a relief rally is coming, with fund managers piling out of dollar holdings and net short positions at $9.7 billion.
The bears smell blood. This is the biggest short bet against the USD since 2012 when the index was trading at 79.27.
Nothing goes straight down or up, so we do expect a very short-term bump higher in the dollar, but once it makes its next leg down in the fall below 92.5, this will trigger a flood of stop losses and shorts.
A wave of selling could quickly become a tsunami.
This will be great for gold, and it is no coincidence that this all comes at a time when the precious metals are at a technical breakout level.
Precious metals have been recently breaking some key levels on the long-term chart and seeing a sentiment that has only been seen twice in the past 5 years, just before the yellow metal moved up $200+ dollars in a matter of a few months.
Our prediction: gold and the dollar will steady in August, with September being a big month for both.
The dollar will see a breakdown in the fall of 2017, and gold will see a major breakout, with new 52-week highs!