From the Desk of Ian Culley @IanCulley

A weaker dollar remains a key ingredient for a risk-on rally. Yet, like interest rates, the buck refuses to roll over.

The US Dollar Index $DXY continues to hover well below last year’s peak, holding within a tight range for the past four months.

Today, we’ll review critical levels for DXY as this trendless action defines the chart.

We’ll also look beneath the surface for signs of broad strength or weakness and revisit a binding intermarket relationship for clues regarding the dollar’s next major move.

First, let’s define the critical boundaries of DXY’s multi-month range:

The 105 level has proven a significant area of resistance. 

On the flip side, the February pivot lows at approximately 101 mark the lower boundary of the year-to-date range. That’s where we find DXY today.

This is the video recording of the April 2023 Mid-month Conference Call.

As it turns out, markets can remain solvent longer than you can remain irrational.

Stocks continue to catch a bid. This is despite any so-called "banking crisis" or even the "upcoming recession" that I've been hearing about for so long.

Markets remain solvent as the major US Large-cap Indexes keep pushing up against new highs.

For many years, we had to hear those miserable gold bugs telling us how inflation was coming and Gold would be our savior.

Well, inflation came in harder than at any point in over 40 years and Gold prices fell.

So the same people who owned the only asset not making any money for an entire decade, got it wrong again.

I can't believe it.

So here we are, Gold prices are pressing up against all-time highs again, now that inflation expectations have been falling off a cliff.

The morning of Good Friday I popped into Fox Business to chat about markets with Maria Bartiromo.

The last time I was on with her, back in October, we discussed how stocks were still in the early stages of a new bull market.

Now that we've seen the S&P500 rally 15% with the Nasdaq100 up 22%, people are starting to believe.

It's been broad based appreciation in stock prices since that October morning.

Every US Sector is positive and many are up over 20%, just since October alone. The numbers are even better when you anchor back to when the new 52-week lows list peaked in June.

Historically, during bull markets you see more and more stocks going up and making new highs. In bull markets you see more sectors participating to the upside and more countries around the world breaking out.

This is exactly what's been happening for about 10 months now.

All these uptrends you're seeing in most stocks is not a new phenomenon.

From the Desk of Ian Culley @IanCulley

Trendless price action remains the way right now for currency markets.

Yes, some of our bearish dollar trades have triggered and are trending. But most have not. 

It doesn’t mean they won’t, of course. But it would be irresponsible not to consider potential outcomes that conflict with my bearish USD thesis…

If the dollar rips, what USD dollar pair would I use to express a bullish outlook?

The answer: the South African rand.

Check out the weekly chart of the USD/ZAR pair:

The dollar has been in a strong uptrend versus the rand for more than a decade. It’s been one base breakout after another, leading to the USD/ZAR challenging its all-time highs last month. 

From the Desk of Ian Culley @IanCulley

The US Dollar Index $DXY is dropping – and our bearish USD trade ideas are beginning to trigger.

While I tend to stick to major developed-market (DM) currencies for placing trades, I still monitor the less liquid forex pairs for information. 

I want to see DM currency strength spill over into emerging-market (EM) currencies, confirming the broadening US dollar weakness. 

As always, I strive to break it down to one level, one chart, whenever possible. 

This next chart does the job…

Here’s the WisdomTree Emerging Currency Fund ETF $CEW:

This is the video recording of our April 3rd Monthly Charts Live Strategy Session

From the Desk of Ian Culley @IanCulley

Commercial hedgers are taking an interest in the Canadian dollar. 

The CFTC has finally updated its records after the recent data breach.

And, as expected, we have some extreme positioning on our hands…

Check out the chart of Canadian dollar futures with the Commitment of Traders Report (COT) in the lower pane (red line for commercials, black for large speculators, and gray for small speculators):

Commercials hold their largest net-long position since early 2019. Extreme positioning such as this tends to mark key inflection points.

Why?

Because commercial hedgers represent the largest short sellers for any given market. And strong hands move markets.

You're seeing the permabears pointing to the Equally-weighted S&P500 falling down towards new 52-week lows relative to the Market-cap weighted version.

You can see what's happening here:

From the Desk of Ian Culley @IanCulley

Fed Chair Jerome Powell spoke this afternoon after the central bank announced a 25-basis-point rate hike. 

The fed funds futures were all over the place, from pricing in a 25-basis-point increase to a double-hike. They settled in around a single hike, with a slim chance of a pause.

Exhausting!

It’s clear we can expect increased volatility going forward.

But, instead of guessing the Fed’s next step or parsing Powell's words, I’ll rather sit back, wait, and prepare to trade a decisive breakout.

When I think about the latter stages of the hiking cycle or a potential pause, my mind immediately turns to one currency in particular…

The Japanese yen.

Since the Fed began raising rates last spring, the yen has been one of the strongest trending markets. It stands to reason it could experience a significant trend reversal as the Fed changes course.

Luckily, we have a clear level to set our alerts and define risk. 

Check out the chart of yen futures:

This is the video recording of the March 2023 Mid-month Conference Call.