It's the weekly currency edition of What the FICC?

Yesterday, the US dollar index $DXY booked its largest three-day gain since it peaked in late September. So will today's bounce turn into tomorrow's rally?

I don't know. But you want to monitor these two levels for insight.

Check it out!

From the Desk of Ian Culley @IanCulley

The US dollar index $DXY has some extra pep in its step after posting three consecutive daily gains.

In fact, the past few days constitute its largest three-day gain since the index peaked in late September.

I think it’s safe to say the long-awaited USD bounce has arrived. The question now is whether it will turn into a sustained rally.

No one knows, of course. But these next two levels will help us prepare for an impactful dollar advance…

First, let’s zoom out…

The early 2017 high of 103.82 marks the first significant hurdle for the dollar index. Let’s call it 104.

If the DXY reclaims this key level, the conversation turns to the possibility of a  failed breakdown. For now, it’s simply pulling back to retest a critical level of former resistance.

If and when DXY bounces back above 104, that brings us to the second hurdle…

...

This is the video recording of our February 6th Monthly Charts Live Strategy Session

Stock market bulls have been rewarded over the past 3 months.

And remember, historically these are the best 3 months of the year - November through January.

And then comes the hangover.

Think about those last three months.

Did you see people having a good time?

Were some having a little too much fun?

Would you agree there was some disorderly conduct?

Were participants behaving as if they were under the influence?

You bet.

And this sort of behavior is normal for this time of the year, and the entire 4-year cycle for that matter.

But then comes February - one of the worst months of the year.

From the Desk of Ian Culley @IanCulley

Everyone wants to know where the dollar is headed next.

It’s great investors are showing interest in the dollar, while understanding the impact it has on risk assets at the moment. 

But I have no idea where the dollar is headed. No one does.

Regardless, I can still form a framework to help make the best logical guess despite an incomplete data set. That’s what we do at All Star Charts!

So let’s recap three points I’ve made regarding the dollar in recent months that I believe hold the greatest weight…

The Time and Place for a Bounce

Given strong seasonal tailwinds and a critical shelf of former highs acting as potential support, the likelihood of a dollar bounce last month seemed probable…

The US Dollar Index $DXY has enjoyed the best returns...

It's a market of stocks.

People forget that.

They choose to obsess over every tick in the S&P500 or Nasdaq instead of recognizing what's happening among the actual components of those indexes.

As it turns out, this has become one of our competitive advantages.

If you're wondering why we tend to be ahead of the curve on changes in major trends, I would point to this.

Most people don't have the time (or are too lazy) to sit there and count how many stocks are going up vs how many are going down.

It's the weekly currency edition of What the FICC?

If the US dollar index $DXY is going to catch higher, it has a funny way of showing it. I haven't ruled out a bout of dollar strength.

Nevertheless, I'm preparing to play USD weakness.

Check it out!

The Dollar was the catalyst all along.

She was always the one.

The strong negative correlation between stocks and the US Dollar has been consistent since 2016.

When the Dollar is weak, stocks rip. End of story.

Look at how well stocks did in the 4th quarter while the US Dollar Index had its first 3 straight months of losses since the end of Covid, which if you recall sparked the greatest 52-week period for returns in the history of the stock market.

I still think it's important to focus on the Dollar, so here are some potential levels of future interest:

From the Desk of Ian Culley @IanCulley

I haven’t ruled out a US dollar bounce. 

But it seems less likely with each passing day.

Other major global currencies are regaining lost ground following a year dominated by dollar strength. It shows in the US Dollar Index $DXY as it continues to slide back within its prior multi-year range. 

Lower lows for the DXY will not instill confidence in dollar bulls. Meanwhile, savvy investors should take its performance as a signal to buy other currencies.  

Here are two of my favorite setups from the forex markets…

Check out the GBP/USD pair on the verge of completing a multi-month reversal formation:

This chart has the hallmarks of a classic inverted head and shoulders with a neckline at 1.2425 (the Dec. 14 close). That’s our risk...

From the Desk of Steve Strazza @Sstrazza

Last week we held our January Monthly Conference Call, which Premium Members can access and rewatch here.

In this post, we’ll do our best to summarize it by highlighting five of the most important charts and/or themes we covered, along with commentary on each

Let’s get right into it!

It's the weekly currency edition of What the FICC?

The US dollar index $DXY registered a "death cross" last week, confirming a bearish trend reversal.

But it's not the confirmation of the dollar downtrend that has my attention. It's what the signal suggests for stocks in the coming months and quarters.

Check it out!