From the Desk of Ian Culley @IanCulley

Last week’s tactical setups are heading toward our targets as G10 currencies lose ground against a rising dollar.

If you let the pound or kiwi trade pass, fear not.

The US dollar/Canadian dollar pair is entering our wheelhouse…

Check out the greenback-loonie challenging a key retracement and former resistance level at approximately 1.36:

I placed a stop order above last Friday’s high of 1.3606. 

A decisive upside resolution above that level puts the USD/CAD in play with a target of 1.3850.

If my order fills, I’ll play this one tight since the dollar-cad trades in the middle of an eighteen-month range. 

I’ll...

From the Desk of Ian Culley @IanCulley

Currency markets refuse to choose a direction.

Up, down, or sideways: None appeal to the major US dollar pairs.

Meanwhile, the US Dollar Index $DXY is catching toward the upper bounds of its yearlong range.

If the dollar continues to rise, these swing trades will break for our targets…

I was monitoring the British pound for a breakdown below the December 2023 lows at approximately 1.25:

Instead of resolving lower, the GBP/USD took the opposite route, breaking above the December 2023 highs.

But those new highs were short-lived as the pound slipped back into its prior range. (Talk about indecisive!)

I like shorting the GBP/USD failed breakout. As long as the pound trades below 1.2766, I’m aiming for last month’s low of 1.2515. 

Meanwhile, a failed breakout leads to a fresh breakdown…

The New...

From the Desk of Ian Culley @IanCulley

Gold is outshining the dollar.

The greenback doesn’t know which way to go, as FX markets offer traders little in the way of breakouts.

Instead of reviewing the chopfest, playing devil’s advocate, and weighing the lack of evidence for a near-term directional bias, let’s turn to a trending market for insight into the dollar.

Spoiler alert: It’s shiny, yellow, and trading at new all-time highs.

Yes, I’m referring to Gold.

Gold and the US dollar hold a classic intermarket relationship — an overt negative correlation. 

As I reviewed the charts this weekend, another pattern emerged between the two. 

I decided to offset Gold ahead of the dollar by roughly two to four years. After adjusting the charts, I landed on setting Gold forward by 130 weeks (approximately two-and-a-half years).

And voila:

...

From the Desk of Ian Culley @IanCulley

Stocks only go up.

Bitcoin is screaming its way back to the former all-time highs. Crude is printing multi-month highs. Even gold is breaking out to new all-time highs after going nowhere for years.

We’re entering the Davey Day Trader part of the cycle — green hammer and all.

Everything is trending higher. Everything except the dollar, that is…

The US Dollar Index $DXY is trading smack dab in the middle of last year’s October-to-December decline:

DXY rebounded to start the year only to find resistance at a critical retracement level.

It’s your standard trendless mess offering little insight into the dollar's next move.

While the ...

From the Desk of Ian Culley @IanCulley

What started out as a bearish reversal in the dollar-yen is beginning to look more like a bullish continuation pattern.

Buying the Japanese yen will produce absolute gangbuster returns – at some point. 

But the market’s simply not there yet…

For starters, Japanese stocks are hitting new all-time highs. These new highs support bullish USD/JPY positioning – long dollar, short yen.

Here’s an overlay chart of the Nikkei 225 Index and the dollar-yen pair, highlighting their positive correlation over longer time frames:

The USD/JPY tends to peak and trough in tandem with the Nikkei. 

We can apply the same logic to global equities, as a dollar-yen rally characterizes a true risk-on environment much like the one we’re experiencing now.

So if the Japanese stocks are taking out their  December 1989 highs, why can’t the dollar-yen do the same?

It’s awfully close to its comparable 1990 high of...

From the Desk of Ian Culley @IanCulley

Commodity currencies are edging higher.

But given the preceding dollar rally, significant breakout levels lie well out of reach.

In the meantime, we can turn to the yen for actionable ideas.

One yen cross is already breaking out!

Check out the aussie-yen cross challenging multi-year resistance at approximately 98.50:

That’s a tradeable level marked by the 2022 high and the June and September peaks from last year.

Buyers are on the verge of cracking this key level as I write. If and when they do, I like it long with a target of 111.15 over longer time frames.

Long AUD/JPY comes with a positive carry. So I’m happy to give this position adequate time to reach our upside objective as long as price holds above our risk level.

The same applies to two additional trade setups…...

From the Desk of Ian Culley @IanCulley

"Can’t Stop, Won’t Stop."

Bloomberg Businessweek plastered that message across its cover in October 2022 – a blaring yellow dollar sign front and center.

Those days are far behind us. The US dollar is trading well below its 2022 peak, and the mainstream media is expressing little concern about its rise.

Yet a series of fresh $DXY highs are causing many investors to fret.

I don’t blame them.

Check out the US Dollar Index completing a three-month bullish reversal:

The DXY has risen more than 4% so far this year and shows no signs of slowing. I can easily see it running back to 107. 

But it's also approaching a logical level to slam on the brakes. Or – heaven forbid – it could reverse course.

Check out the critical retracement level at approximately 105.50:

...

From the Desk of Ian Culley @IanCulley

King Dollar reigns supreme, and its near-term rally shows no sign of slowing.

What can you do about it? 

You can profit from it.

Today, I’ll share with you three tactical setups for dollar strength. And they’re all close to triggering.

But, before I outline the trades, let’s look at the relationship between the dollar and stocks…

Last night, Alfonso dropped a stellar chart in Slack of the US Dollar Index $DXY overlaid with Consumer Staples $XLP relative to the S&P 500 $SPY:

The chart supports the inverse relationship between stocks and the US dollar that’s been in place for almost a decade.

Money flows out of the major stock indexes and into staples when investors are scared.

The same is true for the US dollar. That’s why these two charts look alike.

Interestingly, staples fell on a relative basis as the US Dollar Index chopped...

From the Desk of Ian Culley @IanCulley

The entire marketplace is fixated on tomorrow’s FOMC meeting.

Will the Fed make its first rate cut in March, or will it be in June?

Who knows.

I enjoy speculating as much as the next guy, but I’m not into guessing on next moves by central bankers.

I prefer to track another market participant with a Ph.D. in economics, Dr. Copper.

And we can’t discuss copper without including the Australian dollar!

Check out the Australian dollar overlaid with copper futures:

They look almost identical.

I added a 10-day rolling correlation study in the lower pane, highlighting the tight relationship over shorter time frames.

An increased bid for copper would support the current stock market rally, giving the global economy a clean bill of health. 

Dr. Copper will likely resolve in the same direction as the aussie heading into Friday’s close.

If it doesn't, the above chart suggests...

From the Desk of Ian Culley @IanCulley

US dollar bulls are in control. 

Fresh highs dot the US Dollar Index $DXY chart. Sellers are nowhere to be found.

The question is, when – or where – will buying pressure ease?

If I had to guess (which I do), I’d focus on 104.25:

A key retracement level and former resistance zone mark my spot.

Plus, price has respected that retracement over the past six months, adding to my conviction.

How long sellers will defend 104.25  – if price even reaches it – is anyone's guess.

I don’t have a Magic 8-Ball. (Wait, actually I do, and it says, “Ask again later.”)

Nevertheless, I imagine sellers step in at those former highs. If they don’t…

Global equities will continue to feel the squeeze. This includes metal and...

From the Desk of Ian Culley @IanCulley

Market participants are searching for a new narrative. 

Their uncertainty-fueled meandering is breeding US dollar strength. 

Will the Fed cut, or will they simply do nothing at the March meeting?

No one knows. 

But risk-on currencies have halted their recent advance. And luckily, we have price to light our way…

Check out the New Zealand dollar-US dollar pair (NZD/USD):

The New Zealand dollar is considered a “risk-on” currency as it tends to follow risk assets (global equities and commodities). Notice the NZD/USD rallied into the holidays off its October lows, much like US stocks. That’s not a coincidence.

But last month’s strength has quickly turned into this month’s weakness.

No wonder NZD/USD is sliding below a critical...

From the Desk of Ian Culley @IanCulley

It’s a new year with unlimited possibilities!

Even ol’ King Dollar is turning the page, embracing 2024 and everything it offers with open arms. It’s shaken off the selling pressure from 2023 and appears ready to turn over a new leaf. 

But a bigger dollar rally might need a little help from a nearby friend. 

More on this idea in a second. 

First, let’s check out the US Dollar Index $DXY chart…

The DXY is finding its footing following a brutal holiday season (dropping nearly 5 percent since November 17):

The DXY stopped catching lower right where we would expect: a shelf of former lows at approximately 101.

A period of US dollar strength would make sense as the DXY mean reverts higher, especially as it enters its most favorable month of the year.

Dollar strength likely means...