Major Breakdown in the U.S. Dollar Signals Trouble Ahead

There are numerous signs that the U.S. dollar is on the cusp of a new bear market—a development that is very bullish for commodities, especially gold and silver.

Last week, I published a piece titled “The U.S. Dollar Stands at a Major Crossroads,” where I explained that the U.S. Dollar Index—a key gauge of the dollar’s value against a basket of major world currencies—was sitting right on a critical long-term support level at 100. This level had held firm for years and sparked multiple sharp rebounds in the past. I warned, however, that a decisive break below it would confirm a deeper dollar bear market—an event that would be highly bullish for commodities like gold and silver. If you haven’t read that report yet, I recommend doing so for full context.

Well, that breakdown finally happened today—driven by a combination of factors. Chief among them is growing market anxiety that President Donald Trump may still be exploring ways to remove Federal Reserve Chairman Jerome Powell, a move that would spark a serious crisis of confidence. At the same time, fresh signs of economic weakness emerged as the U.S. Leading Economic Index posted a sharp decline in March. Together, these developments have heightened expectations of Fed rate cuts—an outlook that’s inherently bearish for the dollar.

As the daily chart below shows, the U.S. Dollar Index has clearly sliced through the critical 100 support level that many market analysts have been closely watching. This decisive breakdown issues a strong bearish signal, indicating that further declines are likely ahead.

The longer-term weekly chart of the U.S. Dollar Index highlights just how important the 100 level has been in recent years. Several major rebounds have occurred off this level in the past—typically to the detriment of commodities—but not this time. The index has finally broken down. The next key support level I’m watching is 90, which would represent a 10% decline from here. That’s a very realistic target, especially as we move closer to the recession and bear market I’ve been warning about.

The even longer-term monthly chart of the U.S. Dollar Index reveals that it has been trading within a rising channel since around 2008. A decisive breakdown from this channel, in my view, would mark a major turning point—signaling the start of a new dollar bear market reminiscent of the one that unfolded in the early 2000s.