DXY USD update - RSI divergence

I have revised my downside target from 82 to 83 and have indicated three possible entry points (depending on timing and appetite).

I have added a trend line on the RSI that has not diverged clearly from the price trend, while higher highs have been set the RSI is showing a series of lower lows. While a lot of people don't trust or value technical analysis, RSI divergence does indicate one thing well - reducing momentum. It also often reliably (when viewed with other indicators, price action, and wider economic context etc) identifies reversal points. I have added a line (on the RSI) to indicate one scenario - price setting a higher high (while setting a lower high on the RSI) and then rolling over and heading for 83. Another potential scenario is that the price just continues dropping from its current position.

One potential fundamental cause may be international sellers of US equities repatriating funds due to:
- US stock volatility increasing (and low dividend returns (especially low when compared to the risk of the instrument)),
- Emerging markets offering significantly better interest rates on fixed income government securities,
- Possibly people predicting USD volatility - which may be related to the US government showing open contempt for trade relationships and in some cases a comedic misconception of the benefits of international trade.
- Despite good growth numbers in 2019 (higher inventories despite lowering domestic manufacturing as well as lower imports???), predictions are for significantly reduced growth in 2020 both in the US and globally.

Generally the news is noise, despite the news indicating that the US is taking a number of steps against its own economy (US import tariffs aren't paid by overseas consumers or governments but by US consumers and industry). A larger factor is that the DXY increased significantly since 2009 while the US federal reserve increased monetary supply by roughly 300%. This, to me anyway, is strongly indicative of stored energy - energy that must be expressed somehow.

Maybe it is time to consider allocating some funds to assets that carry no counter-party risk like silver and gold, commodity ETFs, or fixed interest securities. If you think the US is still in a bull market, please view my post on the NYSE which has not been setting new higher highs since Jan 2018. Disclaimer, I am considering investing in equities at the moment. Equities that are undervalued (PE <10), price to book at or below 1.5, stable, low debt, well run, fundamentally sound, high dividend stocks (>6% pa). There aren't that many at the moment though.

My analysis isn't all doom and gloom. One potential scenario is the Feb 2018 low of 88.25 holds at and there is more upside afterwards. That would preserve the possibility of another impulse wave up. However, the USD is a fiat currency and depreciates over time via inflation (inflation is a form of taxation and it is something that the government HAS been trying to increase with varying degrees of success over the past 10 years). A long term up-trend has flown in the face of that factor and I expect a devaluation in line with the lots purchasing power of the USD over the past 10 years (not even considering the vast expansion of supply over that same period).