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The Coming Dollar Highs

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1900$X-Y 2012

QUESTION: Your reference (not for the first time) to new USD highs may be the most striking — and consequential — of all the insightful and startlingly original  remarks you have made in recent years.At the very least it must rank high and cause not a few of us to stroke our chins and ponder.

It seems churlish even to ask,for the consequences are already implicit,but ask I shall. Are you referring to the well-known USDX index with extant highs in Feb 1985 at 164.72 as the high to overcome?

Perhaps you refer to proprietary indices in which case I withdraw my inquiry.

Much thanks for your incomparable commentaries.

Best wishes



ANSWER: This forecast is based upon our proprietary index 1900=Par. The reason is simple. In 1985 the Euro did not exist. Therefore, how they patched that index we have not looked at carefully. It may exceed the 1985 high depending on its mix. In our index, it extends back much further and is far more comprehensive. You can see that the 1985 high is no longer a spike isolated high. We are flattening out the pattern and this warns of a rally. We are just the prettiest of the three ugly sisters – Japan – Europe – USA.  On their index, the low was 1992 compared to ours was 1995 which was the high in the yen against the dollar prior to this deflationary rally in recent years. The 1995 low was a retest of the highs of the Great Depression. This is the same general testing pattern we should see in gold – the retest of the 1980 high of $875.