A Holler to the Dollar

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Over the last couple of days, we saw DXY breakout above the crucial level of 94.50. With this move, the price is trading close to its July 2020 levels. So definitely new 52-week highs for the dollar!

Although the stocks have been rallying regardless of the recovery in the Dollar, a strong move in DXY could most definitely hurt the sentiment of the market.

Commodities have been digesting their gains at logical levels where one would expect them to halt, but have been rather volatile in doing so. Could the dollar have something to do with it? Quite possible.

While on the one hand, risk assets are rising higher, a rally here in DXY could do some damage.

First off, we're going to keep track of the negative divergence that is currently in place. By the end of the week, we should get more clarity on that. But if despite the dollar moving above its resistance, the momentum is lacking, then we might see another rollover. Notice how the most recent higher highs have also had to deal with this lack of momentum, leading to the Dollar losing its steam.

With other risk assets moving out of consolidations and resuming primary trends, maybe this is just a jack-in-the-box moment for the Dollar.

So what's the level that we're looking at?

In the event that the dollar chugs on, the next level to track would be 95.80, with 94.50 acting as the support.

This could of course have an adverse impact on the stocks. So this is definitely one area to observe and one chart to keep on the radar.

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team