If the U.S. Dollar Index followed the "consensus estimate," its price would be some place beneath the bottom of the chart.
For several years now, investor sentiment has often been very negative toward the buck.
When the U.S. Dollar Index bottomed at $74.17 in November 2009, 98 percent of traders expected lower prices. We had been bullish:
"The impending turn higher in the U.S. Dollar Index should roughly coincide with a near-universal belief in the dollar’s approaching collapse."
Financial Forecast, September 2009
From the November 2009 low, the greenback rallied some 20 percent in the several months that followed.
Then the buck "corrected" again, dropping to a low of $72.70 on May 4, 2011. After months of mainly sideways action, prices rallied to near $80.00 by early October. But by October 27 the Dollar Index had retreated to a low of $74.72.
Our November Financial Forecast published on the 4th, shortly after the most recent greenback low and said:
"A major euro decline is underway, which means the dollar should advance strongly."
Indeed, the U.S. Dollar Index has just hit an 11-month high, once again climbing to around $80.
Does this suggest that another correction is around the corner, or does this advance "have legs"?
The December Financial Forecast says:
"As the aggregate value of dollar-denominated debt contracts, remaining 'safe' dollars will gain in value. Moreover, demand for dollars will remain high in order to service the mountain of outstanding debt that already exists."