From the Desk of Ian Culley @IanCulley
Challenging conditions prevail across currency markets.
It’s victory at sea!
But that’s not stopping the dollar from cutting through the chop.
Does that mean it’ll go on a run, applying downside pressure on risk assets?
It’s tough to say.
Nevertheless, I have one chart for you that provides clarity as the dollar begins to make its move.
Check out the triple-pane chart of the US Dollar Index $DXY, our G-10 currency index, and our US dollar advance-decline line:
At the top, we have six pairs dominated by the euro. I’ve been vocal about the significance of the euro trading below 1.08. It’s basic math.
The EUR/USD comprises more than half of the DXY weighting. If it’s trading below 1.08, it’s messy with downside risks – the perfect environment for a dollar rally.
It’s not just the euro. The lower two panes broaden the scope, with 29 pairs constructing our US dollar a-d line.
Dollar strength broadens, evidenced by the new year-to-date highs in the dollar a-d line. Currencies around the world begin to slide against a USD bid.
You have to look beyond the DXY to see the entire picture. And it appears bullish for the USD to me.
I look at thousands of charts in order to distill my thesis or idea into one or two charts whenever possible. The euro and the triple-pane chart do all our heavy lifting today.
But if you like charts as much as I do and you want to see the complete picture, check out the Currency Report chartbook below.
Thanks for reading.
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