How Much Longer Will Rising US Dollar Crush Commodities And Mining Equities?

In May of 2011 I sent out this chart and published an article entitled, “The Euro-Dollar Dance Doesn’t Fool Gold And Silver Bulls”.

I predicted that the Euro (NYSEARCA:FXE) made a bearish technical reversal, while the US dollar (NYSEARCA:UUP) was oversold and could bounce higher to resistance. The chart clearly shows the historical inverse relationship between the Euro and the Greenback which I called the “Euro Dollar Jig”. When one moves up, the other moves down.

At the time the Euro ETF was trading around $140 and the US dollar was hitting new lows, today 4 years later the currencies are in exact opposite positions. The Euro is hitting new lows at $105 while the US dollar is testing highs not seen since the 2008 deleveraging.

I expressed concern back in 2011 that the US dollar could bounce to resistance. I never expected the greenback to get this strong and overbought testing 2008 highs with all of the trillions of dollars printed. I thought gold (NYSEARCA:GLD) and silver (NYSEARCA:SLV) would continue their uptrend with the dollar as a safe haven. Unfortunately, that did not occur.

I predicted back in 2011 that Europe would follow the US by printing and that further bailouts of weak Euro nations would cause a decline in the Euro. As I expected back in 2011 capital flowed to the oversold US dollar.

Commodities (NYSEARCA:DBC) and precious metals did not rally with the dollar as a safe haven and caused a major commodity de-leveraging putting pressure on major mining financial institutions such as US Global Investors, Sprott, Pinetree, Dundee and many others. In 2011, many funds began to raise cash and reduced their exposure to junior mining related equities (NYSEARCA:GDXJ). This has been going on now for more than four years, turning into one of the worst bear mining markets in history.

This bear market is going on for years now as the US dollar bounces higher, while all other currencies including the Euro have been in freefall. This may soon change as the moves in the S&P 500, US Treasuries and Dollar are way overextended into nosebleed territory.