The Market is Wrong About the US Dollar
Benjamin Cowen argues that the U.S. dollar index (DXY) is likely to rise in the short term despite the broader consensus expecting further weakness. He concludes that persistent inflation, rising energy prices, international rate hikes, and a possible Federal Reserve hike could drive the dollar higher and create another headwind for Bitcoin and stocks.
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Benjamin Cowen distinguishes the DXY from the dollar's long-term purchasing power, explaining that the index measures the dollar against other fiat currencies rather than against gold, Bitcoin, or equities.
Cowen says his earlier forecast for the dollar to rise toward about 110 before selling off in 2025 broadly played out, based partly on a comparison with the dollar's behavior during Donald Trump's first term.
He expects the dollar to receive a substantial bounce toward the end of the year, potentially reaching approximately 105 to 106 before selling off again around the election year.
Cowen argues that a stronger dollar could produce another temporary headwind for Bitcoin and the stock market, with a stock-market correction potentially beginning around August or September.
DXY Short-Term Outlook
Cowen argues that the dollar can strengthen against other fiat currencies in the short term even as its purchasing power declines over the long run.
Trump Term Dollar Patterns
Cowen compares dollar performance during Trump's first and second terms, arguing that historical repetition supports another near-term rise followed by a later decline.
Dollar And Risk Assets
Cowen links a stronger dollar to headwinds for Bitcoin and stocks, while identifying higher highs, higher lows, and the two-year yield as evidence of further upside.
Federal Reserve Rate Hike
Cowen argues that international rate increases and historical precedent make another U.S. rate hike plausible, potentially triggering a substantial dollar move higher.
Inflation And Energy Prices
Cowen concludes that persistent inflation and rising energy prices could force the Fed to hike, creating a final headwind for Bitcoin and the stock market.
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