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:

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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...

From the Desk of Ian Culley @IanCulley

Y’all know the drill… 

Dollar down, stocks up.

That dominant inverse relationship remains firm as stocks rip and the dollar dips. 

The market’s message is clear: Buy stocks, sell dollars.

If you trade the FX markets, I have two new setups to ride the falling dollar…

First up, the US dollar-Swiss franc pair USD/CHF:

I’ve been tracking a generational topping formation in the USD/CHF (bottoming formation in the Swiss franc futures) for most of this year.

It wanted to break down in July but lacked follow-through.

Today, the USD/CHF is printing fresh 8-year lows, flashing another sell signal.

I’m short the USD/CHF below .8575 with an initial objective of .8125.

Next, the US dollar-Swedish krona pair USD/SEK:

...

From the Desk of Ian Culley @IanCulley

If it wasn't at the very top of the list, the Japanese yen was certainly among the best shorts of 2022.

But the times they are a-changin’.

King Dollar has ducked down a dark alley.

And it doesn't take a weatherman to tell us to buy the yen.

Here are Japanese yen futures carving out a year-long base following fresh 30-year lows:

I like buying strength on a breakout of this bottoming formation. But the yen has quite a way to travel before completing this possible double bottom. 

I don’t want to miss those potential gains, so let’s get tactical by taking a closer look… 

Check out the daily chart with a Fibonacci retracement framing the 2023 decline:

I’m long Japanese yen futures against 0.7075 (the 38....

From the Desk of Ian Culley @IanCulley

Bing Crosby dreamed of a White Christmas.

Who hasn’t?

Growing up, I wished for a white Christmas every year. I knew snow was a stretch living in Florida. But a kid can dream… 

This season, stock market bulls hope for quite a different, serene vision: a weaker dollar.

Based on the charts, they might just get their wish.

Check out the updated US Dollar Index $DXY chart:

DXY has respected key retracement levels on the way up and down over the past six months. The repeated touches add to my conviction in these levels.

Today’s breakdown below 102.54 suggests further weakness toward the year-to-date lows. A fall to those former lows would undoubtedly stir tailwinds for global equities, producing joy and cheer among investors worldwide.

The 102 area also carries...

From the Desk of Ian Culley @IanCulley

Fiat money worldwide is sidelining the dollar.

Emerging market currencies were the first to strike. Now, their developed market counterparts have joined the fray.

The result: Global equities and precious metals are catching a bid.

After a challenging second half, perhaps the year's final weeks will be a layup for stock and forex traders.

And with the Australian and New Zealand dollars completing tactical reversals against the USD, the Canadian dollar could be next…

Check out Canadian dollar futures bouncing off support:

Buyers continue to defend the 0.72 level as ...

From the Desk of Ian Culley @IanCulley

The dollar has gone from slinging cheese to lobbing cookies.

Sellers finally got ahold of the US Dollar Index $DXY on Tuesday, sending it on its steepest single-day decline since October 2022.

Recall what followed for the dollar…

The DXY formed a major top and fell victim to not one but two subsequent 1 percent-plus daily drawdowns. 

Check out the DXY chart with the one-day rate-of-change in the upper pane:

The DXY dropped almost 1.5% during Tuesday's session. That’s a huge move for a currency (with the exception of the Turkish lira and perhaps the Polish zloty).

Based on the action witnessed last fall, it wouldn’t be surprising for the DXY to experience a reprieve from selling pressure in the coming days, followed by renewed downside action. 

As I mentioned last week, “If and when it (the DXY) falls below...

From the Desk of Ian Culley @IanCulley

The US Dollar Index $DXY is still dealing like an old-school ace on the mound.

I don’t care what stock market bulls or technology investors want to believe.

The buck has been lights out since July.

And just because it found itself in a bit of trouble last week doesn’t mean it can’t retire the side…

The index pulled back to a key retracement level at approximately 105 on Friday:

Unsurprisingly, the dollar bore down at this critical area as it coincides with a logical support zone. 

But, when we take a closer look… 

Sellers are digging in, seeing the spin on the ball, with runners in scoring position.

Check out last week’s breakdown:

The DXY undercut the January and March pivot highs from earlier this...