• 546 days Will The ECB Continue To Hike Rates?
  • 546 days Forbes: Aramco Remains Largest Company In The Middle East
  • 548 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 948 days Could Crypto Overtake Traditional Investment?
  • 952 days Americans Still Quitting Jobs At Record Pace
  • 954 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 957 days Is The Dollar Too Strong?
  • 958 days Big Tech Disappoints Investors on Earnings Calls
  • 959 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 960 days China Is Quietly Trying To Distance Itself From Russia
  • 961 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 964 days Crypto Investors Won Big In 2021
  • 965 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 966 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 968 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 968 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 971 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 972 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 972 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 974 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

Dollar Index: Under Control and Moving Along as Expected

The Dollar doesn't seem relevant anymore. Recent geopolitical events combined with extremes in bearishness and "oversoldness" could hardly get a rise out of the greenback. Last week would have been the ideal set up to reverse its down trend, but lo and behold, nothing. The trend remains down.

Figure 1 is a weekly chart of Dollar Index. The black ovals over the price bars are key pivot points, which are areas of the most important buying (support) and selling (resistance). When we last looked at the Dollar Index, I felt that there was a strong possibility of significant downside (click here for article), and I suggested that a weekly close over the key pivot point at 76.65 would nullify this set up (click here for article). Two weeks ago prices did close over the key pivot by 13 cents but last week, prices closed below this level. This is a close below a support level and this should lead to selling. The next level of support is at 75.30.

Figure 1. Dollar Index/ weekly
Dollar Index/ weekly

The inability of the Dollar Index to serve as the "safe haven" currency during times of crisis is rather telling. In particular, with investors extremely bearish on the greenback, last week would have been an ideal time for a strong counter trend bounce. But nothing developed.

While a lower Dollar has equated to rising equity prices over the past couple of years, I have to wonder at what point that relationship will no longer hold. Remember, devaluing one's currency is not a road to prosperity, and inflationary pressures should be strong headwinds for equities. However, one thing this current Dollar down trend has in it's advantage is that it seems to be occurring at a rather measured pace. "Things" remain under control and moving along as expected.

In sum, support and resistance levels are fairly clear with the Dollar Index; downside risks are substantial although the pace of devaluation appears to be manageable.

 

Back to homepage

Leave a comment

Leave a comment