DoubleLine CEO Warns 25% US Dollar Crash Possible

Jeffrey Gundlach, the CEO of DoubleLine Capital, has warned that the US dollar is on the brink of a significant collapse due to its sustained weakness this year. In a recent video update, Gundlach emphasized his close monitoring of the US dollar index (DXY), which measures the USD's performance against a basket of foreign currencies. He noted that the DXY has been in a macro downtrend and that a loss of a diagonal trendline, which has acted as support since 2011, could trigger a substantial decline.

Gundlach observed that the dollar has been in a pattern of lower highs and lower lows since 1985, with the exception of 2020. He anticipates that this trend will persist, potentially leading to a bear market for the US dollar. If the DXY breaks below the trendline connecting the lows in 2011 (DXY at 72) and 2021 (DXY at 89), Gundlach expects the index to drop to around 72, resulting in a 25% crash. He described this potential scenario as "surreal," highlighting the gravity of the situation.

According to Gundlach's analysis, the DXY must remain above 97 to avoid this dramatic decline. At the time of his statement, the DXY was at 98.24, just above the critical level. Gundlach's concerns are not limited to the dollar's performance. He also noted unusual behavior in the stock market, the dollar, and the Treasury market, suggesting deeper issues that are unsettling investors in US assets. Gundlach proposed that foreign investors holding trillions in US assets may start withdrawing from American markets due to growing concerns over the government’s unsustainable fiscal path. This potential shift could have significant implications for the US economy and global financial markets.