After falling 10% since March 2020, the US dollar index has helped fuel a dramatic recovery in risk markets and push speculative sentiment back to record highs.
As shown in my partner Cory Venable’s weekly chart below since 1996, $92 is now testing the dollar’s long term support.
A bounce in this area is likely to offer the next sobriety test for stock and commodity prices. A definitive close below $92 could re-test the $87 level–where the dollar topped in 2009– and bring further gas for the risk rally.
Stocks are so far beyond economic reality and positive investment metrics at this point, everything is now reduced to a trade. Risk-on or risk-off into year-end? All eye’s on the greenback! Treasury yields today are betting on a dollar bounce. We shall see.
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