Although the Fed did not raise rates yesterday there was an expressed bias towards raising them in due course. This not unnaturally caused the dollar index to rally sharply and the stock market and metals prices to go into retreat.
We have been aware for some time of the growing probability of a breakout by the dollar index from the large Double Bottom base pattern shown on its 2-year chart below. There are several important reasons for this. One that we have already considered is Europe’s desire to have a major war with Russia and to this end they are now trying to induct Ukraine into the European Union. This of course is impelling capital to flee from Europe to the US for fear of exchange controls, which Martin Armstrong considers likely in the future. Other reasons for the dollar to rally are inflationary pressures driving rate rises and the need to bolster the increasingly frail and fragile Treasury market which is groaning under the strain of a $40 trillion debt overhang that will never be repaid.
So keep an eye on the dollar index here – if it breaks out of this large base pattern, which it is increasingly close to doing, we could see a big rally, perhaps as far as 110 which it got to early last year, as there is no serious resistance on this chart until it gets up there.
We will be expanding on this theme going forward, especially with respect to its impact on metals prices.
End of update.
Posted at 11.50 am EDT on 18th June 26.