Has the US Dollar Index Topped Out Yet?

Michele Schneider

Assuming the answer is yes (to the title question: Has the US Dollar Index Topped Out?), here are three points to explore are:

– Where would I reverse that opinion?

– If correct, what does that mean for the markets and economy?

– If correct, where is the underlying support?

On the dollar, I would reverse the bias of a top should DXY first clear 98.45, but even more so if DXY takes out 99.40 or recent highs.

If the dollar has topped out, it means several things for the market.

First off, it means that the cost of some goods is cheaper, which is better for American exports. 

On the other hand, a cheaper dollar means the currency buys less, especially for commodities and goods produced overseas.

us dollar index day topping decline chart image november

Would that spark more inflationary conversation? Possibly yes.

As the dollar does not trade in a vacuum, we have to watch the yields, the next moves of the Fed and the overall economic indicators.

Furthermore, we will see signs from the metals (they will rise in price), and that odd barometer-sugar futures, which continues to base out.

The trickle effect to the market should the dollar drop precipitously is negative. Folks will get scared.

The biggest issue looming, considering the rising debt, is that the dollar loses its place as the worlds’ reserve currency. 

That is the worst-case scenario.

Technically, the support levels for now are at 97.20. Should that level fail, we are looking at 96.20.

Either way, the fall is significant enough to bring buyers into commodities and sellers into equities.

S&P 500 (SPY) 308 support. All-time high 309.99. Record closing prices today.  

Russell 2000 (IWM) 155-156 Key support 158 pivotal 160.46 resistance. 

Dow (DIA) Made a new all-time high at 278.40. Inside day today. 276.25 now nearest support

Nasdaq (QQQ) All-time highs at 202.21. 200.20 support. 

KRE (Regional Banks) 55.55 pivotal support 57.52 next resistance .

SMH (Semiconductors) 134.28 all-time high. Breakaway gap intact if holds 130.

IYT (Transportation) 195 pivotal 194 some support and must clear 200.42 

IBB (Biotechnology) 108.75 nearest support.

XRT (Retail) 43.92 now the pivotal support. 44.30 pivotal. 45.68 resistance.

Twitter: @marketminute

The author may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.   

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