US, 1990s Interest Rate Hike Cycle Replayed?...Benjamin Cowen "Strong Dollar Revival Imminent"

▲ US Dollar (USD)

A forecast has emerged that the US dollar index could return to strength, using the Federal Reserve's (Fed) additional interest rate hike as a springboard.

Veteran trader Benjamin Cowen maintained his strong dollar outlook in a video uploaded to his YouTube channel on September 14 (local time). He believes it is highly likely that the Fed will raise interest rates again this year. As of September 9, when the video was recorded, the probability of an interest rate hike was 60%. Cowen stated, “If the Fed does not raise interest rates, I am willing to change my outlook.”

Cowen analyzed that the dollar index repeatedly followed a pattern of forming a bottom, rebounding, undergoing another correction, and then rising to a higher level. He also compared the dollar's trend during Donald Trump's first term as US president and his current term. During his first term, the dollar underwent weakness and sideways movement before rising from the 608th day of the new administration's launch and maintaining strength until the end of the year. Cowen suggested that a similar trend could appear now.

However, he cited the 1990s interest rate cycle as a more appropriate example to explain the current situation. At that time, the Fed raised and lowered interest rates, then froze them for a certain period, and then raised them again. The dollar index moved around 90-91 just before the re-hike, then jumped to 97 about a month later. He explained that the dollar's strength continued until the Fed lowered interest rates again.

In the long term, a dollar index of 104-105 was presented as the target range, with the timeframe being 2027-2028. Cowen expects the dollar to form a bottom in the near future and then rise during the interest rate hike process. Conversely, he stated that he would re-evaluate his bullish outlook if all recently formed lows are broken downwards.

The weakness of gold was also interpreted as a signal supporting the dollar's rebound forecast. Cowen suggested that the recent poor performance of gold in recent weeks might be an attempt to pre-reflect the future strength of the dollar. His core scenario is that if the Fed's additional interest rate hike materializes, the dollar will rise again, and gold will face relative pressure.

[Key Article Summary]

-Benjamin Cowen predicted that the Fed is likely to undertake an additional interest rate hike within this year.

-In the 1990s case, just before the re-hike, the dollar index rose from approximately 90-91 to 97 in just one month.

-Cowen presented a dollar index of 104-105 as the long-term target range for 2027-2028.

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