Our US Dollar Long Term Percent Bullish breadth reading just reached 100%.
Here’s the chart:
(right-click and open image in new tab to zoom in)
Let's break down what it shows:
The blue line in the top panel shows the price of the US Dollar index.
The black line in the bottom panel represents US Dollar Long Term Percent Bullish breadth reading, which includes 15 key currency pairs.
To calculate the US Dollar Long Term Percent Bullish, we use two criteria:
The closing price of the currency pair must be above its 200-day moving average.
The direction of the 200-day moving average must be rising.
After assessing these criteria for all 15 currencies, we combine the results to obtain a percentage figure.
The Takeaway: The US dollar has been ripping higher over the past quarter, and when we look beneath the surface, we see healthy breadth readings and confirmation of strength as our US Dollar Long Term Percent Bullish breadth reading just reached 100%.
Typically, a strengthening US dollar signals that risk assets, such as stocks, may face challenges due to the broad intermarket implications of the US dollar.
The last time we saw this breadth reading up at 100% was in November 2021. Do you recall what happened around that time? Stocks reached their peak one month later, followed by a decline of over 25% that lasted more than nine months, while the US dollar continued to rip higher.
This is another data point that I am putting in the bearish bucket.
Does this serve as a warning for risk assets? Or am I overthinking it?
Grant Hawkridge | Chief Aussie Operator, All Star Charts
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