Dollar Holla
Dragonfly Capital | May 19, 2016 08:42AM ET
When the US dollar index strengthened from a base level around 80 up to 100 it wreaked havoc on the earnings power or many companies. It quickly became the crutch as to why any company did not meet their earnings estimates. “We would have made $x but that got cut back due to the strong dollar”.
That story cannot go on forever. In fact the US dollar Index has been moving sideways for over a year around a mean of about 95. So US dollars are still relatively expensive, but you have had 15 months to figure out and adjust how to deal with that. And the future looks like more of the same.
The chart above shows the move up to 100 in the Index. It also shows that it has retraced that move by 38.2% twice, forming the range. The latest bounce gained new strength Wednesday after the Fed minutes were released. This resulted in the dollar index breaking short term resistance at 95 and continuing higher. Momentum indicators also strengthened. The RSI moved up into the bullish range and the MACD, which was already crossed up and rising, moved into positive territory.
The next series of tests to the upside start today. There has been falling trend resistance that extends to the current early Thursday Index level. And then the 200 day SMA above at 96.66. If the dollar index continues above both then a retest of the high level in the range seems very likely. At that point we will see if companies are dropping dimes or screaming headwinds.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.