The U.S. Dollar remains one of the most important charts in the world, even if most investors rarely pay attention to it.
Here's why it matters.
Historically, the direction of the dollar has played a major role in shaping risk appetite across global markets.
A weaker dollar has generally been supportive of stocks, commodities, and other risk-sensitive assets. A stronger dollar tends to create more friction for those same areas.
For the past year, the $DXY has traded in a broad range, spending most of its time just below the key 100 level.
Take a look at the chart:
The importance of 100 goes well beyond the round number.
It has repeatedly acted as a major pivot point over time. On top of that, the VWAP anchored from the COVID lows and the VWAP anchored from last year's highs are both converging in the same area.
When several levels align at the same price zone, that level tends to carry more weight.
For now, the dollar remains below that threshold.
As long as DXY stays beneath 100, the path of least resistance remains lower and the backdrop for risk assets remains bullish.
A decisive move back above 100 would alter that picture.
That's the line in the sand.
And until proven otherwise, a weaker dollar continues to support the broader bull market thesis.
Stay sharp 😉
Alfonso De Pablos, CMT
Director of Research, All Star Charts
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