A Top for the Greenback?
The U.S. dollar index has rallied since the summer, but now it’s showing signs of fatigue.
First, this weekly chart had a bearish inside candle in late December. That’s a potential reversal pattern.
Next you have the recent double tops around 96.9. These are slightly below the 97.1 area where DXY bounced in late 2019. Is old support new resistance?
All three succeeding candles have either been solid or had long tails on top. In other words, they failed to hold highs and closed near their lows.
MACD also just turned negative for the first time since May.
Turning to the macro backdrop, the Federal Reserve has taken a sharply hawkish turn: first tapering, then aggressive rate hikes and now balance-sheet reduction. With that triple-tightening priced in, traders who “bought the rumor” may “sell the news” by unloading the greenback.
Separately yesterday, Goldman Sachs predicted that the European economy will grow faster than the U.S. this year and next -- another potential negative for the dollar.
DXY could be important to watch because has the potential to impact a wide range of equities, especially metals and global stocks.
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Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: https://www.tradestation.com/important-information.
First, this weekly chart had a bearish inside candle in late December. That’s a potential reversal pattern.
Next you have the recent double tops around 96.9. These are slightly below the 97.1 area where DXY bounced in late 2019. Is old support new resistance?
All three succeeding candles have either been solid or had long tails on top. In other words, they failed to hold highs and closed near their lows.
MACD also just turned negative for the first time since May.
Turning to the macro backdrop, the Federal Reserve has taken a sharply hawkish turn: first tapering, then aggressive rate hikes and now balance-sheet reduction. With that triple-tightening priced in, traders who “bought the rumor” may “sell the news” by unloading the greenback.
Separately yesterday, Goldman Sachs predicted that the European economy will grow faster than the U.S. this year and next -- another potential negative for the dollar.
DXY could be important to watch because has the potential to impact a wide range of equities, especially metals and global stocks.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
Important Information
TradingView is not affiliated with TradeStation Securities Inc. or its affiliates. TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. When applying for, or purchasing, accounts, subscriptions, products and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means.
This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates.
Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: https://www.tradestation.com/important-information.
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