US Dollar Index Playing Ball So Far

July 28, 2023

The US dollar index (DXY) has halted where it ‘should’ have on the bounce into FOMC

[edit] In the time it took to write this post Uncle Buck held the tentative support level (dashed green line) and put in a hammer to turn positive in pre-market. Of course he did! Keep an eye on the EMA 20 on the very short-term.

[edit 2] Ah, the culprit was backward looking GDP. Yes, of course. As you were. As a side benefit, Goldilocks got a bump as the PCE was lower than expected.

We expected a bounce to test the USD breakdown sooner or not too much later. Indeed, a logical point for the bounce would have been the 62% Fib retrace of the entire bull move (clearer on the weekly chart per this post). Instead, Uncle Buck decided to take matters into his own hands sooner and above that Fib, right into FOMC.

The bounce has halted at the most logical objective, which is where the daily EMA 20 (dotted line) meets the upper bound of the clear resistance area. Had USD bounced from the Fib I’d be a little more wary of it because that was not only a Fib, it was also long-term support per the weekly chart in the link above.

Still, if USD is somehow able to hold up here and resume upward, it is not out of the bearish woods and would not be until it takes out, holds and rises from the now down sloping SMA 200 (orange).

For several weeks now, NFTRH has been illustrating the prospects of an ‘anti-USD trade’ that could do two things: 1) See internal rotations into the more anti-USD stuff like commodities, commodity/resources markets and precious metals, and into the traditional late stage stuff like defensive Healthcare, Staples, DJIA (ref. the target per this July 17 video) and 2) signal the ending stages of the rally from Q4, 2022. All of this against a disgustingly over-bullish sentiment backdrop. So it’s all high risk, by definition.

If the dollar resumes its breakdown we have targets we will be tracking each week because this may be the last money making opportunity from the bull side for quite a while. Then it’s out of the pool! The bear side, on the other hand, could in 2024 be easier than it’s been for, well, seemingly forever.

A continued dollar decline, if it goes as it appears to be going, may be the last “play” for the Everything Bubble. Because after it’s over, unless Team de-dollarization is improbably correct, it’s going to get very ugly out there. Uncle Buck will be pissed.

These forward looks do not come from a man simply staring at charts. They come from a mix of internal market indications, sentiment profiles, macro status AND a man staring at charts. So again I will digress and repeat that my chart staring brothers and sisters are not doing this kind of work if all they stare at are nominal charts.

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