Transcription
Hey folks, welcome to verified investing.com. My name is Gareth Soloway and I'm going to cover your currency update here.
The dollar, the dollar, yen, the euro, the British pound. We're going to look at it all because there are some big things going on in the currency markets. And I'm very concerned in 2026 for the US dollar to potentially break a major, major support level that could continue that de-dollarization effect that's been going on.
Let's take a look at the charts. As always, we look at these charts so that we don't make personal assumptions or emotional decisions. It's whatever the charts say. All right. So the first thing we see here is you can very clearly see there's this big level on the dollar. And if you go back to 2022, when the dollar had this big bull run against other currencies, we then were pulling back multiple times, right, over and over and over again. And ultimately, this showed us this zone here on the DXY was incredible support. And again, that lasted from about 2022 all the way until we broke below it in April of 2025.
Now, you remember what happened in April 2025, right? That's where we had the tariffs imposed on many countries, uh, by President Trump. Now, what's interesting about that is that caused the dollar to break down. Now, why? Well, not just really the tariffs. The tariffs were just an ancillary effect. If you think about it logically, how do other countries feel about denominating all of their assets in US dollars or holding massive amounts of dollars when it gives the United States so much control over them, right? So, the idea here is this was a singular event that triggered a speeding up of de-dollarization. Listen, it was always going to happen. The question is, was it going to happen over 50 years, 20 years, 10 years? What? And ultimately, we're seeing it start to accelerate to the downside. And that's what the chart is actually showing us, right? Is that, you know, we imposed these tariffs, the United States did, President Trump did, and essentially other countries said, man, we got to diversify away from reliance on the US dollar and the United States. And that created a breakdown.
Now, we had this quick snapback and then look at how it tried to break above. In fact, we got a daily close above but no confirmation. We never confirmed a resumption of the upward trend. In fact, it got rejected, came down, went up, hit again, rejected, hit again and again, and each time rejected. And so notice in technical analysis how this was key support in here, right? All through here and then once it broke, it became key resistance, right? All of this zone becomes resistance. And that's classic technical analysis. Support that gets broken becomes major resistance.
Now, this is the next thing we got to go over. The next thing we have to go over is this trend line. I'm flipping over to the weekly chart. This trend line that goes all the way back to 2008. Now, in 2008, we know what was going on, right? And again, notice how when you're looking at the dollar, there's specific things that go on that create the moves, right? For instance, we just looked at when did the dollar break down in 2025 below that former it was support for the longest time for two to three years and then we broke when the tariffs were announced and implemented on other countries. Well, if we look at this chart and we go back even further, we can clearly see what was going on in March of '08. The financial crisis in the United States was in full effect from 2008 into 2009. And when that happened, the Fed was looked at as being the gold standard. And the dollar really got to got traction there. And what we saw is the dollar has been in an uptrend. Notice how again, all along here, support, support, support, right? All along there and then support. And look at what we just hit recently. And so the idea is, is when you look at technical analysis, what we're saying is we can clearly see this has been support now for 27 years, right? Almost 28 years as of next March.
The key is this, and my concern is this, right? Is that ultimately, and let's get rid of these lines so we keep it clean, is that if we come down and we break this, which odds are starting to favor because of how many hits on a trend line we've made. Remember, the more hits on a level, the weaker it becomes. i.e., one hit, two hits, three hits, four hits, five hits, and then on the sixth hit, it finally broke. Well, look at this. One hit, two hits, three hits, four hits, five hits. This would be the sixth hit to the downside. And again, if that breaks, it stands to reason that there's major damage done to the US dollar because we've now broken the 27 to 28-year uptrend in the dollar against the basket of currencies, right? The DXY is against a basket of currencies. And so again, if you extrapolate that out, is that positive or negative for the US dollar going forward when it breaks technical support? And the answer is clearly it's negative. And it likely means we're headed much, much, much lower. I would say your next stopping point is going to be right in here. Look at how this here at 89 and a half. High pivot, high pivot. So resistance, resistance. We broke out, support, right? And so it makes sense that if we break here, we would go all the way down to 89, then get a bounce, maybe back to the scene of the crime. But eventually, likely when you break a long trend that goes back this many years, and I apologize, I'm saying 2026 years, 28 years, it's only it's only basically 17 to 18 years. I apologize for that. Uh, math is hard sometimes. All right, but either way, the point is, you guys can clearly see that if this breaks, the longer-term trend on the US dollar is now broken.
Okay. So again, in 2026, this is the line right here, right around 96.66 on the DXY. It's creeping up slowly, but obviously this will be something to watch. And then vice versa, we always look at, well, where do, let's say, where does the dollar regain its composure? All right. And the answer is very simple on that, right? If the dollar can ever take out this level and rise up here, the dollar then has broken back through this level. So again, right now you're kind of in what we would call a wedge pattern. This line is sloping up. You have this flat top. It's slowly squeezing price, but the odds favor a breakdown, okay, in the dollar in 2026.
Now, is that good for gold? Ultimately, yes. Is that good for Bitcoin? Yes, it is good for Bitcoin. Although, remember, Bitcoin trades often like a risk asset. So, it can fall if the stock market's falling. But ultimately, it's good for any asset that's denominated in dollars, right? That asset should go up in theory, right? Okay.
All right. So, let's go into the Euro USD here. The Euro USD is confirming the analysis that we just did on the dollar. Why is that? Well, you have this trend line that goes back to '09. So, again, right back here, the financial crisis. You had again, notice how the euro kept hitting resistance, resistance, resistance, resistance, and then it broke out. And since it's broken out, look at the pattern it's forming here, folks. This is a classic what we would refer to as a bullish consolidation pattern, right? In technical analysis, we have patterns, bull flags and bear flags. A bull flag is a move up and then sideways chop like this. That's almost identical, right, to this pattern right here. And this usually resolves itself with a move up. And so ultimately, again, the idea is, is that the euro should continue to strengthen in 2026 against the US dollar.
Now, what about the yen? The dollar yen. Now, the dollar yen. So, this is again the opposite of the euro, right? So, this tells us the fact that we've broken out here on the dollar yen. This tells us that the yen is going to weaken further. Now, it's retracing. So, it's gaining, basically the yen is slowly strengthening right here as it's falling. The dollar yen is falling. It might retrace here. But this is the one caveat, right? Is that this is essentially this chart is telling us that you have the euro that's going to strengthen against the dollar, but the yen, probably because of their financial issues, 240% debt to GDP, the yen is actually going to weaken against the dollar. So, yen will get weaker. The dollar will get weaker against the euro, and we'll look at the pound, but again, the yen will get weaker against the dollar. All right. So, the yen will be the ultimate loser, loser. The dollar will be the second loser, if you will, and the euro and the pound, based on chart analysis, will continue to do better. And we'll look at the pound in just a second, but I just wanted to go through that. So, the idea here is here's your high pivot. High pivot, you have your hit right here. So, that was three hits. We broke out. We had a classic retrace. We went up. We could retrace one more time, but eventually, as long as this line holds, the bias remains bullish on the the US dollar yen.
Now, flipping over to the British pound. This is a classic parallel. Look at the beauty of this parallel. Now, listen, we could take away the parallel, frankly. Like, I could just bring this up here and you'd get the same thing, right? Trend line, pivot high, pivot high, pivot high, breakout. So, this is the the the pound against the dollar. Remember, we were just looking at the dollar against the yen before. Uh, but this is the pound against the dollar. And so this, the pound has broken out, retraced, retraced, but it's holding major support. And therefore, the path of least resistance on the pound is further upside.
All right. So again, this should be a bigger breakout. And that's why I was mentioning that the euro, all right, the euro again, bull flag following a breakout. The pound breakout, bullish consolidation, holding support, that's bullish against the dollar. And then obviously the last one is the dollar yen, which again, the yen has weakened, the dollar again, essentially has broken out against the yen, and again, this should trade higher, which tells you the yen is weakening against the dollar and should continue to weaken.
So, really interesting stuff here, guys. Again, it, you know, if you extrapolate it out, number one, we were just looking earlier on in the video about the key points. Like, it's not a coincidence that the dollar broke key support against a basket of currencies when the tariffs were introduced because it was a trigger for other countries to say, "Wait a minute, the the US has too much control over us because they have this reserve currency and we're so reliant on it." And so what happens? They start to diversify away and the dollar breaks down. All right. Then again, you can extrapolate out to 2009 and see what happened there in 2008, the financial crisis. And ultimately, we look for major events that can change the future of the US dollar. But right now, the path remains that countries, most countries are looking to diversify away, de-dollarization. And we can extrapolate that out to saying the dollar gets weaker. That's not good for inflation here in the US as well. Um, over the longer term, but more than anything, it tells us gold, silver, metals, Bitcoin, maybe while those are maybe overbought near term, they likely are going higher.
All right, guys. Hardcore analysis on the currency front. It's not a pretty picture for the US dollar in 2026 and beyond. I will keep you posted. Take care.