The short-term US dollar cycle peak is upon us. It is time for capital flows to rule the direction of the US Dollar Index (DXY), as capital flows and interest rate differentials often move currency around.

If capital flows take over, then the DXY is going into the 80's at least. Of course, hiking rates 4 times is easier on the world when the DXY is near 80 rather than 95. A lot of US debt that is held by emerging markets is at risk otherwise. And, yes, a lower US dollar in early 2022 helps China out, as it supports world demand. Additionally, Chinese stimulus is expected in late 2022.

The US dollar cycle appears to be rolling over in the short-term.

Some people do not want the US dollar to fall, as it has often been beneficial to be long the US dollar trades. Jamie Dimon of JP Morgan says he could see 6 to 7 rate hikes in 2022. Of course, silver shorts unwinding will not be great for JP Morgan.

There are too many open trades requiring the US dollar to stay trending higher. This sector is worth watching.

2022 is going to be fun.