Stephen Jen, who has long been bearish on the US dollar, said that although the dollar has rebounded recently, the weak dollar will continue to decline. He predicted that overseas economic growth will accelerate, further weakening the appeal of the dollar.
The CEO of Eurizon, a London-based asset management firm, known for his “dollar smile” theory, is betting that the US dollar index will fall by another 13.5% during the remainder of Donald Trump’s presidency. This does not include the expected decline of about 7% in 2025, which has already made the dollar on track for its worst year in eight.
Jen said that although the US dollar has recouped some ground in recent weeks, “the next major trend for the dollar will still be a decline.”
Trump’s unpredictable trade policies and market expectations of a rate cut by the Federal Reserve have both contributed to the dollar’s weakness this year. On Tuesday, the Bloomberg dollar index edged lower after ADP Research Institute data showed that the pace of job growth in the US slowed in the second half of last month, further strengthening the case for the Fed to lower borrowing costs further.
The longest government shutdown in US history and the absence of official economic reports led to the dollar posting its second-best monthly performance of the year in October. It is expected that lawmakers will resolve the government shutdown in the coming days.
The further weakening of the US dollar is in line with the “Dollar Smile” theory framework proposed by Jennifer Armstrong over two decades ago. This theory holds that the US dollar tends to strengthen during periods of strong US economic performance or severe recession, while it faces pressure when economic growth is only slightly ahead of or behind that of the United States.
Jen said, “Since the beginning of this year, the decline of the US dollar has mainly been driven by push factors, such as the US driving capital out of dollar assets, but the pull effect from Europe or Asia has not been obvious. We are still watching for a soft landing of the US economy, which should promote accelerated growth in other regions of the world.”
Last year, while the US economy grew strongly and those of other countries struggled, Jen’s view was proved premature. Despite the severe impact of the global trade war, Jen said that the outlook for the global economy to perform better than expected is now more optimistic. European economic growth is improving, and China remains “highly competitive”.
Technical analysis:
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Gold: The green zone of 4128-4139 yesterday did not have an effect; however, the yellow zone of 4114-4104 was quite effective. The price has dropped again from above 4140 today. We suggest waiting for a confirmation signal near the 4100 round number before taking action, or simply wait for the break of the round number and then catch the rebound after the liquidity is low. For detailed positions, please consult the plugin.
(Gold 15-minute chart)
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Nasdaq: The green area buy limit we provided through the plugin yesterday performed exceptionally well. After the price dropped into this area, it rebounded strongly very soon. For today, we suggest protecting the overnight long positions appropriately and then wait for the new breakout signal on a smaller time frame. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: After breaking through to 60.75 yesterday, it did not complete a pullback to the blue zone. For today, we suggest paying attention to the secondary pullback confirmation near 60.50; or continue to watch for a signal of a further breakout. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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