From the Desk of Ian Culley @IanCulley
The US Dollar Index $DXY has resumed its march toward fresh lows.
It took a less direct route, meandering sideways for the past seven months.
Nevertheless, our roadmap for a DXY breakdown has remained useful.
The EUR/USD is trading above 1.08. And commodity currencies are recapturing their July pivot lows from last summer.
These are key developments that support further USD weakness, leading us toward today’s breakdown.
Thanks to sellers taking control of the market, today’s session is offering another critical piece of confirming evidence…
An oversold reading on the 14-day RSI.
Notice DXY never registered an RSI print below 30, even during the strong selloff last fall.
Wednesday’s oversold reading marks a significant shift in momentum. The bullish regime that has remained in place since the beginning of DXY’s parabolic advance in 2021 has lifted.
The dollar bears have gained control of the index.
It makes perfect sense.
Our bullish trade ideas for the euro, British pound, Swiss franc, and Canadian dollar are all working. These four currencies alone make up more than 80% of the dollar index.
More importantly for the broader market, a weaker dollar will likely act as a catalyst for the next leg higher in risk assets.
Stocks worldwide have enjoyed a consistent bid over the past six months while the dollar has gone nowhere.
Imagine how they’ll react once a falling dollar picks up the pace.
Momentum is finally swinging back into the bears’ court.
We expect renewed tailwinds for stocks and commodities (especially gold) in the coming weeks and months if sellers continue to drive the dollar lower.
Stay tuned!
Let me know what you think. I love hearing from you!
And be sure to download this week’s Currency Report!
You need to have a subscription to access this content in full.
Log in or
subscribe
