From the Desk of Ian Culley @IanCulley
The US Dollar Index $DXY is kicking ass and taking names.
The dollar has ripped higher ever since the July failed breakdown.
It’s now challenging fresh six-month highs and a critical former resistance area.
An upside resolution for King Dollar will undoubtedly pressure risk assets – not the ideal scenario for stock market bulls.
And the dollar rally has plenty of room to run if the DXY is a reliable indicator…
Check out the number of consecutive up-weeks in the lower pane of the US Dollar Index chart:
The DXY has finished in the green for nine consecutive weeks and counting, producing a bullish momentum thrust.
It hasn’t experienced a similar winning streak since the 2014-15 rally when it posted 13 consecutive weekly gains.
Notice how readings of similar magnitude have led to further strength during the past decade.
In fact, these outliers tend to come in pairs – initial and secondary thrusts. You can see a more significant thrust kicked off the 2014-15 uptrend, while equal consecutive up-weeks marked the 2021-22 rally.
I don’t hang my hat on one piece of information. Instead, I take a balanced approach, focusing on price.
Therefore, the DXY must decisively close above 105.50 before I can put conviction behind a stronger dollar.
But bulls are taking control of the market with a relentless bid.
If the US Dollar Index resolves higher and buyers remain at the wheel, we could be witnessing the first of two bullish momentum thrusts, with the second hitting sometime in Q1 of next year.
I’ll provide a more in-depth view of the dollar in tomorrow’s episode of “What the FICC?”
Thanks for reading!
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