Been looking at what investment services are advising their clients to do in the face of a depreciating USD... needed help getting through some of this 🙋🏻♀️
Perplexity ai:
I need help understanding what the advice to clients in this piece is; and how it follows from the analysis of the value of the USD provided...
The piece’s advice to clients is essentially: expect a weaker but still important U.S. dollar, position for gradual depreciation rather than a sudden collapse, and stay flexible and data‑driven in FX and asset allocation decisions.
What the USD analysis is saying
From the analysis you’re referring to, the main points about the dollar’s value are typically:
The USD has already weakened against most major currencies in recent months and over the past year.
U.S. growth is slowing, inflation is moderating, and markets expect or are experiencing Fed rate cuts, which reduce the dollar’s yield advantage.
At the same time, geopolitical tensions and risk episodes still generate safe‑haven demand, which can periodically support or even strengthen the USD.
The conclusion is that the multi‑year period of structural USD strength is likely over and that the medium‑term bias is toward further depreciation, albeit with episodes of counter‑trend rallies.
How this leads to client advice
From that diagnosis, the piece’s advice to clients logically follows along these lines:
Tilt away from structural USD overweights
If the dollar is expected to weaken over the medium term as rate differentials compress and the prior bull cycle has ended, long‑term USD overweights become a drag on non‑U.S. investments when translated back into other currencies.
So the advice is to start reducing strategic USD exposure versus a diversified basket of other major currencies (euro, yen, CAD, etc.) rather than assuming continued USD outperformance.
Selective opportunities to short or underweight USD
With the base case of gradual USD weakness, there is scope for tactical positions that benefit from the dollar drifting lower, especially against currencies of economies with improving growth or relatively tighter policy.
The piece, however, stresses that this is opportunity with risk: because the USD still acts as a safe haven, sharp bouts of risk aversion can cause sudden rallies that hurt outright short positions.
Emphasis on risk management and hedging, not “all‑in” bets
Given the two opposing forces—fundamental headwinds vs. safe‑haven support—the article advises using hedges and position sizing rather than binary calls on a USD collapse or resurgence.
That means: staggered entry points, options or partial hedges on foreign currency assets, and predefined stop‑loss levels in FX trades instead of concentrated leverage.
Maintain global diversification; don’t abandon USD assets
Even with expected depreciation, the USD remains the dominant reserve and invoicing currency, and there is no clear alternative that can fully replace it.
Therefore, the advice is not to exit USD assets wholesale, but to maintain diversified exposures across currencies and regions while modestly tilting toward those likely to benefit from a weaker dollar (for instance, non‑U.S. equities and emerging markets with improving fundamentals).
Stay data‑dependent: watch the Fed, growth, and geopolitics
Because the dollar’s path is seen as “data‑dependent,” clients are urged to track macro data, Fed communications, and geopolitical risks closely.
The advice is that portfolio FX positioning should evolve as new information shifts the balance between rate expectations, growth differentials, and risk sentiment, rather than being set‑and‑forget.
Putting it together in plain language
In practical terms, what the article is telling a client is something like:
Do not assume the dollar will keep doing what it did in the 2010–2024 bull run; expect more weakness over the next few years.
Use that view to modestly increase exposure to non‑USD currencies and assets, and consider carefully sized trades that benefit from a softer dollar.
But because the USD can still jump when the world is nervous, keep risk controls tight and avoid one‑way, highly leveraged anti‑dollar bets.
If you can paste the specific passage or paragraph you’re working with, I can map each sentence of the advice more precisely to specific elements of the USD analysis (e.g., “because the Fed is expected to do X, the recommendation to Y follows”).
The article’s advice to clients is: watch the 96 level on the dollar index (DXY) very closely; if it clearly breaks and holds below that level, investors should assume the dollar’s longer‑term uptrend has likely ended and position for further dollar weakness, but if it holds above 96, treat the current move as a consolidation where the dollar can still rebound.
What the USD analysis says
The dollar index has fallen to its lowest level since 2022 and is now sitting near support around 96, which aligns with lows from July and September and with an uptrend line that goes back to 2008.
This zone is described as a “secular” or long‑term support area, meaning it has historically marked major turning points for the dollar rather than just minor pullbacks.
The article notes that the dollar has already failed at key moving averages, which signals that the prior phase of strength has weakened and that price action has turned more fragile around this support.
How the advice follows from that analysis
The strategist then sets up a simple “if/then” decision framework that turns the technical analysis into client guidance:
If DXY stays above 96
Holding above 96 keeps the long‑term uptrend intact, because the rising trendline from 2008 remains unbroken.
Advice implied: treat this as consolidation, expect the dollar to stabilize or bounce, and be cautious about aggressively betting on further USD declines (for example, be careful with very large short‑USD positions).
If DXY breaks and holds below 96
A “sustained break” below 96 would mean the secular uptrend has likely failed, which opens the way to the next major support band between 89 and 90 on the index.
Advice implied: assume the dollar’s decline is not over, and consider positioning for more weakness (for instance, reducing USD overweights, hedging USD income, or favoring assets that benefit from a softer dollar).
The strategist explicitly says clients are “looking for” which of two scenarios plays out: either a consolidation phase where the dollar bounces off the long‑term uptrend, or a resumption of the downtrend if the index breaks below 96. That framing directly converts the chart analysis into a conditional trading and positioning plan.
In plain language
The technical work identifies 96 on DXY as the line in the sand that separates “still in a long‑term bull trend” from “probably entering a deeper bear phase.”
The advice is: do not overreact while the dollar is sitting on that line, but be prepared to shift strategy quickly if a decisive break below 96 confirms that the long‑term support has failed and further downside toward 89–90 becomes likely.
If you tell me which specific sentences or phrases in the article you find confusing, I can map each one to the underlying technical idea (support, trendline, moving averages, or scenario) so you can see exactly how the conclusions are drawn.
What is the 2008 trendline?
In this article, the “2008 trendline” is a long‑term support line drawn on the U.S. dollar index (DXY) chart starting from the major low made in 2008 and connecting later low points over time.
What that means technically
In 2008, the dollar index hit a significant cycle low (around the 70–72 area), which many technicians treat as the start of a long bull cycle in the dollar.
If you plot that 2008 low on a long‑term chart and then connect it with later important lows (for example lows in 2011, 2014, 2018, etc.), you get an upward‑sloping line: this is the “2008 trendline.”
Because it has been respected multiple times over many years, it is viewed as a key long‑term support; a decisive break below it is interpreted as a signal that the secular (multi‑year) uptrend in the dollar may be ending or reversing.
How it’s used in the article
The article is saying that DXY is now trading right on or just above that long‑term uptrend line from the 2008 low, so this level is a kind of “line in the sand.”
If the dollar holds above that line, the long‑term uptrend is still intact; if it clearly breaks and stays below, the chart would suggest a shift into a deeper or more persistent downtrend for the dollar.
If you like, I can walk you through how you would sketch that trendline yourself step‑by‑step on a free DXY charting site.
Has anyone analysed what makes for these benchmarks, or is it just an observation?
There is a whole body of work on how support/resistance “benchmarks” are defined, but specific levels like 96 or 89–90 on DXY are largely empirical observations anchored in that framework.
How technicians justify these levels
Textbook technical analysis defines support and resistance as price areas where buying or selling pressure has repeatedly stopped or reversed prior moves, often visible as prior swing highs/lows, congestion zones, or long-term trendlines.
The more times price has “touched” or bounced from a level without breaking it, the more meaningful that level is considered; some academic and practitioner work even formalizes this as a higher probability of bouncing when a level has many prior touches.
What that means for DXY 96 and 89–90
In the DXY case, 96 is a long-term trendline/support area and prior floor; 89–90 is a zone where past down-moves have stalled and reversed, so chartists treat it as the next likely support band on a longer-horizon point-and-figure/price chart.
So these benchmarks are not arbitrary, but they are not derived from a fundamental model either: they are rule-of-thumb levels drawn from observed historical price behavior, framed using widely taught support/resistance concepts rather than a single closed-form formula.
