Will the Fed cut, or will they simply do nothing at the March meeting?
No one knows.
But risk-on currencies have halted their recent advance. And luckily, we have price to light our way…
Check out the New Zealand dollar-US dollar pair (NZD/USD):
The New Zealand dollar is considered a “risk-on” currency as it tends to follow risk assets (global equities and commodities). Notice the NZD/USD rallied into the holidays off its October lows, much like US stocks. That’s not a coincidence.
Even ol’ King Dollar is turning the page, embracing 2024 and everything it offers with open arms. It’s shaken off the selling pressure from 2023 and appears ready to turn over a new leaf.
But a bigger dollar rally might need a little help from a nearby friend.
More on this idea in a second.
First, let’s check out the US Dollar Index $DXY chart…
The DXY is finding its footing following a brutal holiday season (dropping nearly 5 percent since November 17):
The DXY stopped catching lower right where we would expect: a shelf of former lows at approximately 101.
The dollar has gone from slinging cheese to lobbing cookies.
Sellers finally got ahold of the US Dollar Index $DXY on Tuesday, sending it on its steepest single-day decline since October 2022.
Recall what followed for the dollar…
The DXY formed a major top and fell victim to not one but two subsequent 1 percent-plus daily drawdowns.
Check out the DXY chart with the one-day rate-of-change in the upper pane:
The DXY dropped almost 1.5% during Tuesday's session. That’s a huge move for a currency (with the exception of the Turkish lira and perhaps the Polish zloty).