From the Desk of Ian Culley @IanCulley

For weeks, I’ve been itching to call a top in the US Dollar Index $DXY.

Sentiment, volatility, and momentum thrusts have all suggested an end to the US dollar wrecking ball. But price hasn’t indicated any significant weakness in the structural trend.

The absence of confirming price action has made it impossible to take a bearish USD stance.

But that’s finally starting to change!

From the Desk of Ian Culley @IanCulley

The US dollar has stopped going up!

In fact, it’s already registered a slightly lower high and lower low this past month. 

But we can’t call a top in the US dollar yet. While it came close to officially triggering a top last week, the lack of follow-through kept us in our seats.

With fresh monthly candles in the books, let’s review longer-term charts and reiterate key levels for ol’ King Dollar.

From the Desk of Ian Culley @IanCulley

The dollar is dropping!

It’s finally time to bet on some sustained downside action, and the euro is my vehicle of choice.

I laid out the conditions that would flip my outlook on the euro earlier this month. Three weeks later, the pieces have fallen into place for a bullish position.

Let’s take a look.

From the Desk of Ian Culley @IanCulley

I don’t care what your favorite TikTok financial guru says: Trading isn’t easy.

The market has made this point again and again this year.

The market has also driven home another essential truth: Trends persist.

I talk about this approach quite a bit because I’m a trend-follower. It’s my favorite Dow Theory Tenet, and it's the foundation of my approach to the markets.

Trend-following might sound simple. But it’s far from effortless. Like any worthwhile philosophy, real-world applications can sometimes be a struggle. 

In fact, no other market has tested my trend-following resolve quite like this year’s unstoppable dollar. And I’m still looking for opportunities to get long…

From the Desk of Ian Culley @IanCulley

One of the most valuable tactics I’ve learned in my career is the ability to capture a strong trend as it’s trending. 

I’m not talking about FOMO buying or blindly chasing breakouts.

In my experience, buying strong trends requires patience and discipline. 

Today, exercising these two key traits is especially necessary if you're trading the explosive US dollar. 

Navigating the latter stages of the dollar rally presents challenges, particularly in dealing with heightened volatility. However, it doesn’t mean we can’t join in on this trend responsibly as it barrels down the tracks... or, in this case, up them.

From the Desk of Ian Culley @IanCulley

The US dollar has been under pressure for the past five days, and investors are dancing in the streets.    

I get it. A weaker dollar sits at the top of every stock market bull’s wish list. When the dollar goes down, stocks tend to go up. But don’t forget – betting against the dollar has only brought pain this year.

So, instead of joining the celebrations, I nailed down a clear-cut strategy for selling dollar weakness. 

Spoiler Alert: Early sell signals are already starting to fire!

From the Desk of Ian Culley @IanCulley

The calls for a dollar top are growing louder as analysts claim the advance is overextended. 

They’re right. But pushing further into overbought territory is exactly what parabolic rallies do. And many of the technical tools supporting the thesis that the dollar is topping do not apply. 

In practice, mean reversion tools such as oversold/overbought conditions, price exceeding the upper bounds of a Bollinger Band, or the percentage gain above the moving average du jour are best used in trendless markets. 

Does the dollar look trendless? Absolutely not! 

Don’t let these data points distract you. Let’s instead put the current DXY advance into perspective by focusing on historical price action. 

From the Desk of Ian Culley @IanCulley

The US Dollar Index $DXY is on cruise control with nothing ahead but an open road.

The few obstacles that stood in its way are falling to the wayside. That’s right – the handful of commodity currencies that have refused to roll over during the past six months are beginning to slip.

Before we get to these fresh breakdowns, let’s set the scene with two currencies that have been anything but resilient – the euro and the British pound.

From the Desk of Ian Culley @IanCulley

Sometimes you have to go back to the basics. 

One simple concept has served me well over the years: Don’t fight the primary trend.

There are many other best practices I use to maintain my sanity regardless of underlying market conditions. But sticking with the underlying trend is fundamental to any trader’s success. 

As Charles Dow established more than a hundred years ago, trends persist! This concept is one of the key Dow Theory tenets and forms the foundation of any trend-following strategy.

It’s our job as technicians, traders, and investors to identify the primary trend and ride it as long as possible. 

And it’s difficult to imagine a stronger trend in 2022 than the rising dollar.

From the Desk of Ian Culley @IanCulley

Did we just experience the largest bear market rally in history? 

Or did the June low mark the bottom for stocks?

Instead of getting caught up in the "bull vs. bear" debate or, even worse, attempting to pick the bottom, let’s focus on a singular fact…

US dollar headwinds persist. And whether it was the bottom or not, as long as this is the case, stocks are likely to remain under pressure.

From the Desk of Ian Culley @IanCulley

Currency markets have provided stellar trading opportunities this year. 

It isn't always this way.

Last year was rough. False breakouts and whipsaws were the norm, as most forex pairs and crosses chopped sideways in trendless ranges.

Many of those consolidations have now resolved, as currency markets have begun to trend again. And it’s hard to find a stronger primary trend to bet against than the declining Japanese yen. 

We’ve written about the yen multiple times in the past few months, pointing out that The Yen Provides the Base and joking that we could profit by simply buying Anything in Yen.

Today, we’ll follow up by outlining three tactical setups to bet on further yen weakness.

From the Desk of Ian Culley @IanCulley

The US dollar Index $DXY is trading at fresh highs. Take a look around the currency market. It shows.

Recent attempts to fade dollar strength have failed. The euro has fallen to its lowest level since late 2002. And we’re beginning to see forex pairs experience fresh breakouts in favor of the USD.

It’s certainly not the best look for risk assets. But it’s offering us great trading opportunities, not to mention some very valuable information.

A couple of pairs that are providing both are the USD/CNH and the USD/CNY. Let’s take a look!