Is The US Dollar Headed Higher?

Chris Kline
Mar 2
2 min read

1.) US DOLLAR - Not long ago, the whole world thought the US Dollar Index was going to break down and, well, just go away. Below is a chart of US Dollar Index Futures, going all the way back to 1996. This is a rising channel, and it’s been intact for two decades. On JAN 26th, the Index tapped the low end of that channel, hitting $95.55. Since then, the Index has moved up through trend yesterday, now sitting at $98.52. The trend breakout was at $97.89. If, and this is a large IF at this point, it can hold above that $97.89 level, the US Dollar Index will have flipped to a bullish trend. What is that signaling? It would likely be a combination of a flight to safety due to the Iran situation along with a declining probability of rate cuts. We shall see.

U.S. Dollar Index chart shows data from 1996 to 2024. Red and blue text highlight trends and possible future commodities supercycle.

2.) IRAN - It’s important to understand that with every day that passes, the probability of a major Iranian action that causes an oil shock likely declines. At the start of a war, Iran might be able to launch 50 missiles or drones at once at Saudi infrastructure. Now, maybe that number has dropped to 15. A few days from now, maybe it’s 5. I do think that the commodity cycle is likely to roll from Gold, to copper, to Oil, as I discussed yesterday. But this Iran situation is potentially changing the calculus. After the U.S. has significantly weakened Iran and continues to degrade it, that creates a quiet debt. The Gulf states have always seen Iran as their biggest regional threat - not Israel. If Trump asked for lower oil prices, they would likely help. For now, oil is still in a bullish trend. The first significant resistance is at $75.34.

3.) GOLD - Could gold finally be cooling off? Maybe. Or does it just need some more consolidation before its next leg higher? Again, maybe. It failed to make a new high yesterday. In fact, it hit a high of $5,419.32 and dropped. That was an important level as it was the all-time high set on JAN 28th. Right now, it looks more like gold likely has more consolidating to do, especially with gold volatility (GVZ) above 34.