The dollar experienced significant volatility last week, posting its largest single-day loss since 2015.
As far as we’re concerned, the dollar is done. The weight of the evidence strongly suggests its best days are behind it. But that doesn’t mean it’s straight down from here for the US Dollar Index $DXY.
Instead, we expect plenty more volatility in the coming weeks and months. And when we look beneath the surface of the DXY, we’re at a logical level for the dollar to catch a breather.
Sentiment, volatility, and momentum thrusts have all suggested an end to the US dollar wrecking ball. But price hasn’t indicated any significant weakness in the structural trend.
The absence of confirming price action has made it impossible to take a bearish USD stance.
In fact, it’s already registered a slightly lower high and lower low this past month.
But we can’t call a top in the US dollar yet. While it came close to officially triggering a top last week, the lack of follow-through kept us in our seats.
With fresh monthly candles in the books, let’s review longer-term charts and reiterate key levels for ol’ King Dollar.
It’s finally time to bet on some sustained downside action, and the euro is my vehicle of choice.
I laid out the conditions that would flip my outlook on the euro earlier this month. Three weeks later, the pieces have fallen into place for a bullish position.
I don’t care what your favorite TikTok financial guru says: Trading isn’t easy.
The market has made this point again and again this year.
The market has also driven home another essential truth: Trends persist.
I talk about this approach quite a bit because I’m a trend-follower. It’s my favorite Dow Theory Tenet, and it's the foundation of my approach to the markets.
Trend-following might sound simple. But it’s far from effortless. Like any worthwhile philosophy, real-world applications can sometimes be a struggle.
In fact, no other market has tested my trend-following resolve quite like this year’s unstoppable dollar. And I’m still looking for opportunities to get long…
One of the most valuable tactics I’ve learned in my career is the ability to capture a strong trend as it’s trending.
I’m not talking about FOMO buying or blindly chasing breakouts.
In my experience, buying strong trends requires patience and discipline.
Today, exercising these two key traits is especially necessary if you're trading the explosive US dollar.
Navigating the latter stages of the dollar rally presents challenges, particularly in dealing with heightened volatility. However, it doesn’t mean we can’t join in on this trend responsibly as it barrels down the tracks... or, in this case, up them.
The US dollar has been under pressure for the past five days, and investors are dancing in the streets.
I get it. A weaker dollar sits at the top of every stock market bull’s wish list. When the dollar goes down, stocks tend to go up. But don’t forget – betting against the dollar has only brought pain this year.
So, instead of joining the celebrations, I nailed down a clear-cut strategy for selling dollar weakness.
Spoiler Alert: Early sell signals are already starting to fire!
The calls for a dollar top are growing louder as analysts claim the advance is overextended.
They’re right. But pushing further into overbought territory is exactly what parabolic rallies do. And many of the technical tools supporting the thesis that the dollar is topping do not apply.
In practice, mean reversion tools such as oversold/overbought conditions, price exceeding the upper bounds of a Bollinger Band, or the percentage gain above the moving average du jour are best used in trendless markets.
The US Dollar Index $DXY is on cruise control with nothing ahead but an open road.
The few obstacles that stood in its way are falling to the wayside. That’s right – the handful of commodity currencies that have refused to roll over during the past six months are beginning to slip.
Before we get to these fresh breakdowns, let’s set the scene with two currencies that have been anything but resilient – the euro and the British pound.
One simple concept has served me well over the years: Don’t fight the primary trend.
There are many other best practices I use to maintain my sanity regardless of underlying market conditions. But sticking with the underlying trend is fundamental to any trader’s success.
As Charles Dow established more than a hundred years ago, trends persist! This concept is one of the key Dow Theory tenets and forms the foundation of any trend-following strategy.
It’s our job as technicians, traders, and investors to identify the primary trend and ride it as long as possible.
And it’s difficult to imagine a stronger trend in 2022 than the rising dollar.