Will This Dollar Rally Ever End?

From the Desk of Ian Culley @IanCulley

US dollar bulls are in control. 

Fresh highs dot the US Dollar Index $DXY chart. Sellers are nowhere to be found.

The question is, when – or where – will buying pressure ease?

If I had to guess (which I do), I’d focus on 104.25:

A key retracement level and former resistance zone mark my spot.

Plus, price has respected that retracement over the past six months, adding to my conviction.

How long sellers will defend 104.25  – if price even reaches it – is anyone's guess.

I don’t have a Magic 8-Ball. (Wait, actually I do, and it says, “Ask again later.”)

Nevertheless, I imagine sellers step in at those former highs. If they don’t…

Global equities will continue to feel the squeeze. This includes metal and mining stocks and, of course, gold and its cohorts.

The Emerging Market Currencies ETF $CEW printing fresh two-month lows less than a month after hitting new two-year highs tells the story:

The story is broad dollar strength.

The downside momentum thrust toward the end of last year coupled with a bearish divergence on the 14-day RSI warned of potential selling pressure ahead.

Now that it’s here, and the dollar is back on top, we must clamp down on risk and follow our trading plan.

Remember, this is a simple game.

Stay tuned.

Let me know what you think. I love hearing from you!

And be sure to download this week’s Currency Report!