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Contrarians watching the USD

Commentaries & Views

Last week we wrote that the FED might give a reason for the market to take the DXY up to 115; when Jerome Powell said that he wants positive real interest rates, the market responded.

DXY has gone onto to hit the top trendline we showed last week, and it did it in a hurry; the updated chart is below.

In consequence, gold finally broke down from the long-term 2-year support between $1650 - 75. Stocks have finally closed the downside gap we have been pointing to for weeks. Note (below) that further downside gaps exist. Will the market begin to accelerate its belief in the Fed’s conviction? If so, a DXY at 120 (which was the 2001 high) is the next level of resistance.

An extended parabolic move in the USD should drive stocks down to the open gaps, as well as perhaps give contrarian investors and traders a major opportunity to get long a few asset classes, including the precious metals sector.

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