• 681 days Will The ECB Continue To Hike Rates?
  • 681 days Forbes: Aramco Remains Largest Company In The Middle East
  • 683 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,083 days Could Crypto Overtake Traditional Investment?
  • 1,087 days Americans Still Quitting Jobs At Record Pace
  • 1,089 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,092 days Is The Dollar Too Strong?
  • 1,093 days Big Tech Disappoints Investors on Earnings Calls
  • 1,094 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,095 days China Is Quietly Trying To Distance Itself From Russia
  • 1,096 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,099 days Crypto Investors Won Big In 2021
  • 1,100 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,101 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,103 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,103 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,106 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,107 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,107 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,109 days Are NFTs About To Take Over Gaming?
Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

Strong U.S. Dollar Weighs On Blue Chip Earnings

Strong U.S. Dollar Weighs On Blue Chip Earnings

Earnings season is well underway,…

  1. Home
  2. Markets
  3. Other

Dollar's Rally Looks Tired

On November 10th, using data from the November 9th close, we mentioned concerns relative to short-term reversals in some currencies, precious metals, and the VIX. From their lows to their subsequent highs, we did end up seeing the following:

  • The dollar gained 7.6%
  • The VIX gained 33.7%

From their highs to their lows:

  • Gold fell 6.6%
  • Silver fell 14.7%
  • The euro dropped 9.2%

US Dollar Index - Daily

Our concerns on November 10th included bullish divergences showing up on the charts of the U.S. dollar. While it is too early to read too much into it, we now see short-term bearish divergences on the chart of the dollar. If the dollar were to weaken again, it should benefit gold, silver, and commodities in general. It would also help the euro. Weakness in the VIX may also accompany renewed weakness in the dollar.

Three charts have recently caught our attention. We hypothesized on November 30th the blue band shown below may act as resistance. So far, it seems to be holding in the real world, which leans bearish for the dollar.

US Dollar Index - Weekly

Healthy markets usually see a higher low in price accompanied by a higher low in technical indicators. When price makes a higher low and technical indicators make lower lows, we have what are known as a negative or bearish divergences. Often, not always, these divergences foreshadow a change in the short-term trend. The current short-term trend in the dollar is up. The divergences shown below need to be monitored since the dollar impacts numerous markets from gold to oil. It is possible the market will clear these divergences, but as long as they remain sustainable higher highs in the dollar will be less likely.

US Dollar Index

The weekly chart below is an updated version of the chart presented at the top of this article, with two technical indicators added (top and bottom). At point A, the MACD indicator made a lower low when price made a lower low - no divergence present - which "confirms" the low and tells us a lower low may eventually be in store. Near point B, notice how the trendlines drawn back on November 9th have recently acted as resistance for price (see pink and green lines). At point C, we have not yet seen a bullish cross in the Rate of Change (ROC) indicator, which also tells us a lower low may be in store for the dollar.

US Dollar Index

Charts do not predict the future; they simply allow us to monitor the present and recent past. The charts tell us the odds for further weakness in the U.S. dollar are increasing again. Using the terms "odds" and "probability" speaks to the need to remain flexible and open-minded should the markets begin to present different information. Currently, the bulls still control the U.S. dollar relative to the short-term trend. The bulls appear to be losing their grip somewhat.

 

Back to homepage

Leave a comment

Leave a comment