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US DOLLAR Technical Analysis: A Boring Bull Market Like 2012 SPX500

US DOLLAR Technical Analysis: A Boring Bull Market Like 2012 SPX500

Tyler Yell, CMT, Currency Strategist

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Talking Points:

  • US Dollar Technical Strategy: Buy the Dip Above 21-DMA at 12,150
  • Boring Bull Trend Favors Slow Gring Higher
  • Seasonal Tendencies Favor USD Strength for January

The US Dollar recently published its highest close since 2003. However, the volatility has been severely lacking but a recent market’s multi-year bull market should comfort USD Bulls. From 2009-2013, the SPX500 was in doubt because we rarely saw high volatility in the upside. However, we are in the midst of the third longest equity bull market since World War III, and the US Dollar could be on a path to its third largest bull market since the Bretton Woods Accord as well. What’s impressive with the US Dollar is the resilience it has shown even when historically correlated markets like the 2yr US Treasury Yield have fallen in anticipation that the Fed will not be hiking as many times as previously though whether you blame that on the Yuan, albeit appropriately or the fear of commodities sending emerging markets into a crisis.

Technically, we are sitting at 12-year highs and so the burden of proof goes to the bears. In other words, saying something is overbought will not work I this relative environment. As noted earlier, the SPX500 continued to rise do to macro forces despite fearful aggressive buying as we saw in late 2008. In other words, the Bull Market in the US Dollar in a relatively low volatile manner seems to show that the ‘Panic’ button has not been pressed yet like it was in 2008. For now, the key support should be seen as the 21-DMA and January 4, close at 12,150/55. Until those levels breaks, selling would be selling into strength, which is a risk strategy as those fighting commodity currency weakness have found out repeatedly.

The remaining preference on US Dollar will remain to buy-the-dip in US Dollar especially in January, which is the US Dollar’s best month from a seasonal perspective. The US Dollar remains a top-spot on a relative basis where the JPY, EUR, currently switch back and forth for the top spot. The ATR(5) on the USDollar has dropped to ~36 points, and an intraday target to the upside off yesterday’s low would turn the focus back towards yesterday’s high of 12,233. A break below 12,155/50 would be a cause of concern for USDollar bulls and may show the EUR & JPY are firmly in the driver seat as fear steers this market and US Dollar takes a backseat, but that is not the high-probability view now.

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US DOLLAR Technical Analysis: A Boring Bull Market Like 2012 SPX500

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