From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
Is the US Dollar Index $DXY on the brink of completing a massive reversal pattern to the downside?
As more evidence comes into the picture, it’s looking increasingly dire for the dollar. In fact, we’re seeing it trend lower across all timeframes against almost all of its peers.
And this action has only gained steam over the last week as DXY has plunged to fresh multi-month lows.
Dollar weakness has been a nice tailwind for risk assets since its peak in March of last year. Any additional downside pressure in the coming weeks, months, and even quarters would not surprise us… especially if this daunting double-top pattern breaks lower. If and when this happens, further weakness from both a tactical and structural standpoint is exactly the bet we’ll be making.
Let’s dig deeper and look at what actually drives the DXY. By looking at the various crosses that make up the index, we gain insight in terms of building a directional bias for DXY. This process also provides a weight of the evidence framework we can use to build a much bigger picture view of the greenback and its overall health.