The recent US Dollar Index rally is providing a headwind for commodities, while pushing other currencies down.
Should the rally extend further, it may create a bigger disturbance in the financial markets… perhaps even extending to equities.
Today’s chart of the US Dollar Index takes a long-term “monthly” view and highlights why King Dollar may be nearing an important inflection point.
As you can see, the US Dollar has spent most of the past 25 years inside of a falling channel marked by each (1). On the other hand, the Dollar has also spent most of the past 10 years inside of a rising channel marked by each (2). These two trends are converging…
More recently, King Dollar double bottomed at (3) and the ensuing rally has taken it up toward its long-term falling trend line at (4).
Something has to give soon. Will it be a breakout higher and trend change… or a turn back lower. In my humble opinion, what happens to King Dollar at (4) looks quite important. Stay tuned!