Billionaire Jeffrey Gundlach, who got the nickname ‘Bond King’ at Wall Street, warns of an even weaker US dollar. He suspects that the dollar can drop by 25% in 2025. That could have disastrous consequences for the world economy.
American dollar in large downward trend
According to Gundlach, the dollar index (DXY) has been in a downward trend for years and a “real bear market” threatens when an important support line is broken.
“The dollar has been showing a pattern of lower peaks and lower soils since 1985, with the possible exception the year 2020,” said Gundlach. “But I think the decline will continue. And I know I am not the only one in that.”
He refers to a diagonal trend line that has lasted since 2011. “If you mentally draw a line from the low point in 2011 (Dxy around 72) to the bottom in 2021 (Dxy around 89), and we break under it, then I think we are in a structural bear market for the dollar.”
If that scenario becomes reality, Gundlach expects that the dollar will even fall below the lowest point of the past ten years. “That would be really surreal,” he concludes.
Dollar must remain above this level
According to him, the American dollar index must remain above 97 to prevent a sharp fall in the direction of 72. At the time of writing, the DXY notes at 98.24, only a fraction above the warning limit.
Gundlach bases his analysis on a long -term diagonal trend line that goes back to 2011. If the dollar drops under it, he can, according to him, herald a decrease of around 25 percent.
Last week the billionaire expressed his concerns about the behavior of the financial markets. According to him, the stock market, the dollar and the market for US government bonds behave “not as usual.” With that he hints on underlying problems that make foreign investors nervous.
Gundlach warns that international investors, who jointly hold Biljins Dollars to American assets, will possibly remove their money from the US if confidence in the American budget policy is crumbling further. Could that cause a flight to Bitcoin?
Source: https://newsbit.nl/obligatiekoning-waarschuwt-amerikaanse-dollar-kan-25-crashen/
