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U.S. Dollar USD Index ZERO Bound

Currencies / US Dollar Oct 16, 2010 - 03:26 AM GMT

By: Joseph_Russo

Currencies

Best Financial Markets Analysis ArticleWho is fooling whom?"
It is with sheer disbelief, and utter amazement that the real world accepts such an empty unit of exchange to start with.  To fathom a plausible reason for such collective behavior, one need not go any further than studying the classic conditioning experiment of Pavlov and his dogs.


More astonishingly, the entire world, which has been built and financed from such empty illusions of exchange, will require exponential infusions of the same, with every imaginable variant accelerator to keep faith alive, and the ponzi-scheme on sound footing."

The above introduction was extracted from an article we penned more than three years ago titled Gold Boom / Dollar Bust.  The article is perhaps more relevant today than it was back then.  Apart from some slight degree of trend modifications, our Elliott Wave analysis and technical assessments contained within the article remains spot on.

Todays updated real-time $USD charts continue to illustrate a gargantuan falling wedge pattern that is in our view taking place at SUPERCYCLE dimension.  As an aside, another zero-bound market, long-term treasury yields, exhibits a similar type of supercycle architecture.

The ideal wave pattern illustrated in the upper right hand corner of the chart depicts where we stand today at the red dot noted by the <<2010 reference.  There is no better pattern from which our financial masters of illusion could better engineer the most orderly and flexible destruction of currency.  (The same applies to treasury yields.)

Below, we enlarge todays chart to get a bit of a closer look at the current stage of unfolding.

From where we stand today in Elliott wave terms, we see three highly plausible outcomes to the inevitable zero-bound path of the $USD.  Do realize that no matter which Elliott wave path the $USD ultimately adopts; all such roads shall inevitably lead to Rome.

  1. In the first rapidly waning scenario, it remains possible that the $USD remains in the violent throws of a primary degree bull market advance, which we have labeled "B" << PRIMARY in red.  Such a rally could mark its crest in 2012.
  2. In our second scenario, it may be such that the primary "A" wave down has yet to bottom.  We currently have this "A" terminal positioned at the 70.70 print low that occurred in 2008.  It may be such that the current slide in the dollar may ultimately retest or breach beneath these lows prior to or into the 2012 period.  If the dollar can establish a solid base from such levels, this newer low beneath that of the standing 70.70 benchmark may well mark the entire primary "A" down instead.
  3. We illustrate our last and most bearish case in the purple-colored primary degree wave labels 1 - 5.  In this scenario, the 70.70 low registered in 2008 marks a first of five primary waves down amid the larger cycle degree "C" wave.  It is in this scenario that we can see the total destruction of the $USD sooner (2017-ish) rather than later (2020's-30's).  All told, it is not a matter of IF; rather it is a matter of "when".

Between now, "when" and beyond, opportunities to protect, and preserve one's capital, in addition to profiting handsomely along the way shall prevail so long as civilization and financial markets do.

BULLS RUSH IN
All that said, we shall leave you with some closing thoughts imparted from Bulls Rush In published just over a year ago in August of 2009.
 
Shepherds of Illusion engender a continuation of the desired stampede
As the Dow approached its early July low, we offered readers opinion on what we believe might be some of the goals resident amid concentrated ruling elite bodies which strive to maintain full-spectrum control and order over the masses.  We titled the piece "Shepherds of Illusion".  Our thought summary from this piece was the following:

"In summarizing our viewpoints, the potency and effect of distortive interventionist political and monetary policies together with participants herding tendencies to "stampede" are in fact what determines that authorities' success or failure in maintaining their monopoly and status quo preferences, all of which are vital to their ongoing supreme and elite existence of full spectrum dominance and rule."

"Regimes successful in the management and chosen direction of desired policy-induced stampedes, will likely fulfill their prime directives and remain effectively dominant and in vital control of the masses."

"The most vexing concept associated with this analogous tale of intrigue, is that it remains disturbingly plausible that with continued administration of these hyper-nuclear drugs, they might just give this otherwise very dead patient, the very real impression that they are still alive and well."

"The gravity of such distortions carries the outlandish possibility of eventually delivering a hallucinogenic denial-induced rally taking equities back up toward their 2007 highs.  There, we said it.  As morbid as it is, until we are able to record (or admit) a time of death, so long as we remain open to constant rule changes and creative innovation, anything can happen by the hand of the wonderful wizards of Wall Street and Washington."

Until then, Trade Better/Invest Smarter

By Joseph Russo

Chief Publisher and Technical Analyst
Elliott Wave Technology
Email Author

Copyright © 2010 Elliott Wave Technology. All Rights Reserved.
Joseph Russo, presently the Publisher and Chief Market analyst for Elliott Wave Technology, has been studying Elliott Wave Theory, and the Technical Analysis of Financial Markets since 1991 and currently maintains active member status in the "Market Technicians Association." Joe continues to expand his body of knowledge through the MTA's accredited CMT program.

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