From the Desk of Ian Culley @IanCulley
King Dollar is reclaiming its throne.
The US Dollar Index $DXY hit a new year-to-date high on Monday, punishing other global currencies.
The euro undercut its June pivot lows. The pound dropped for the fourth consecutive session. And the yen is well within reach of its lowest level since the summer of 1990.
Other major currencies don’t stand a chance against USD strength.
If you can’t beat them, join them!
The Swiss franc might be the next to succumb to this old proverb as it prepares to bend the knee.
Check out the US dollar-Swiss franc pair pulling back after posting a new eight-year low:
The price action following those eight-year lows mirrors the failed breakdown in the dollar index – sharply higher.
But the USD/CHF has reached a logical level to pause, marked by a polarity zone at approximately 0.9125.
The area coincides with a shelf of former lows and key pivot highs from earlier this spring, revealing a former support level turned resistance.
Considering the explosive gains over the two-trailing months, a slight correction or consolidation seems likely.
Nevertheless, the US dollar shows no signs of slowing down.
Here’s a closer look at the US dollar- Swiss franc’s potential trend reversal:
Momentum has already completed a bearish-to-bullish reversal. The 14-day RSI broke out of a bearish regime by registering an overbought reading and its highest level in a year.
The question is whether price will follow.
Yes, the USD/CHF has violated a yearlong downtrend line. But I don’t want to buy this dollar pair until a decisive break above 0.9125 (the June pivot highs).
I’ll set my target at 0.9425 if and when it takes out that level.
King Dollar is dominating – again! That means more woes for major currencies and global risk assets.
Weakness is setting in at the index level for US stocks. And it will likely persist as the US dollar gains strength.
Thanks for reading.
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