What is a BULL MARKET TRUNCATION?
This pattern happens in both BULL AND BEAR markets, in the case of the DXY, the thesis would revolve around a BULL MARKET TRUNCATION. Where Wave 5 failed and that initiated a BEAR MARKET. If that is the case, the last DXY rally (2021) was a corrective wave higher and we are set for a move lower.
Here is the FRAME WORK for that THESIS:
These are MONTHLY CHARTS, which represent LONG TERM views.
There is also the CURRENT ACCOUNT BALANCE, which is VERY NEGATIVE and the correlation to the overall STRENGTH of the DXY (DOLLAR) is very evident from the chart below:
Looks like the USD needs to play a bit of catch-up.
For now, we are comfortable with our SHORT DOLLAR positions, and plan to trade it from the SHORT SIDE (our thesis is that we are entering a WEAK DOLLAR trend). The question we are trying to answer is whether or not this trend will be medium term or long term. That is yet to be determined, but there is mounting evidence that the DOLLAR MOVE could have more to it than what we see.