Back in October, former GLG macro fund manager Raoul Pal told Business Insider that the most important chart in the world was the long-term chart of the US dollar index.
He warned us that it was on the verge surging in what would be “the biggest technical break in the history of fiat currencies.“
“I think the most likely outcome is for a pause in the dollar rally soon,” Pal said in an email. “That pause is the pause that refreshes, blows out a lot of the over-positioning before the real move starts.”
He expects that the move will begin in the early part of next year.
“My view is that in 2015, probably in [January] or maybe [February] at the latest, the dollar is going to start its real move, which will be shocking in its velocity. It is that dollar rally that will clear break the key level in the $JPY, the Euro, the Aussie dollar, the ADXY (Asian DXY) and the RMB. I think that spills into all emerging equity markets and emerging bond markets too. Clearly this would cause the next down leg in oil and other commodities.”
He continued: “The risk is for a global recession in 2015 but that is too early to give a higher probability too, although clearly most of the world is near recession or in recession anyway (thus making it very fragile to a shock).”