Dollar Advancing to 16-Month Highs Depends on Its Preferred Correlation

Talking Points:

  • The DXY and equally-weighted Dollar indices are both close to 16-month highs and breaking range
  • USDJPY or a few select correlations can assess whether the Greenback can settle into a true bull trend
  • Download our recently released fourth quarter forecast for the Dollar and majors here

Technical Forecast for US Dollar: Neutral

My outlook for the Dollar this past week was thrown for a loop. While the moderate level of resistance presented by the DXY Index around 96.15 was significant for more restrained markets, the sanctity of any near-term levels falls apart when volatility is added to the mix. And that is exactly what happened across the financial markets. The broad – and frequently aggressive – decline in risk assets this past week charged the Greenback through the ‘right shoulder’ on the five-month head-and-shoulders pattern that we have been tracking for this benchmark. Has the currency donned its familiar garb as a safe haven, which could in turn lift us beyond August’s swing high at 97 in the week ahead? That depends on both the state of sentiment across the markets and a few key correlations that we should watch

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