DXY Daily TA Cautiously Bullish
DXY Daily cautiously bullish. Recommended ratio: 75% DXY, 25% Cash. *Demand for USD continues as global recessionary fears amplify and tighter monetary policy pushes investors to short term Treasuries (Yield Curve inversion). The Euro is maintaining parity with the USD for the third consecutive day as Italy's Prime Minister Mario Draghi submitted an offer to resign today. Interestingly, as DXY continues pushing higher to reach levels last seen in 2002 (taking liquidity from Cryptos, Equities and Commodities), markets are currently reacting favorably to Fed Governor Christopher Waller's remarks today about how the markets are "getting a bit ahead of themselves" regarding inflation and that the job market is healthy enough to continue economic expansion. Waller also mentioned that though 75bps is all but guaranteed, he is waiting on June retail sales data (scheduled for release tomorrow 07/14/2022 at 830am EST) and housing starts/building permit data (scheduled for release 07/19/22 at 830am EST) to determine if demand is still so high that it warrants a full 100bps or more rate hike on 07/27/22. DXY has only traded above $108 in three other periods: 1967-1973 (two recessions 69-70 and 73-75, Nixon "nixed" the Bretton Woods Agreement and Gold Standard in attempt to stimulate the economy and ring in inflation, the third and fourth Arab/Israeli wars, 1973 oil crisis and stock market crash); 1981-1986 (one recession 81-82 after short rate-hike induced recession in 1980, Cold War fears pushed investors to DXY as Russia tested nuclear weapons in Kazakhstan, Iranian Revolution prompted 1979 energy crisis, Fed tightened monetary policy to bring down inflation, stock market only crashed 81-82 and rallied from 83-87); and the only period where CPI was relatively low (below 3.67%) and DXY was above 108 was 2000-2002 (short recession in 2001, Y2K, Dot-Com bubble popped, 9/11). That said, history shows that financial markets mostly tumble and the economy enters a recession as DXY rallies above 108; using this pattern one can surmise that if DXY continues to rip higher, markets may go lower.* Price is currently trending up at $108.63 as it technically tests $108 resistance. Parabolic SAR flips bearish at $106.20, this margin is neutral at the moment. RSI is currently trending up at 76 after bouncing at 73, the next resistance is at 82. Stochastic is currently in the process of crossing over bearish as it trends sideways at 97 in the 'bullish autobahn zone'. MACD remains bullish and is currently trending up at 1.25 as it tests 1.24 resistance with no signs of peak formation; the next support is at 0.64 and resistance at 1.92. ADX is currently trending up at 42 with no signs of peak formation as Price continues to push higher, this is bullish. If Price is able to defend support at $108 then the next likely target is a retest of $115 resistance for the first time since February 2002. However, if Price is rejected here at $108 and breaks down, the next likely target is a retest of the 50 MA at around $103 support. Mental Stop Loss: (two consecutive closes below) $108.
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