US Dollar Decision Point

Chart: US Dollar Decision Point

Every so often you come across a chart like this where there is a big long-term technical tension playing out. Bears will highlight the Lower major Highs (drawing the red line), bulls will highlight the Higher major Lows (drawing the green line). Both of them are right, and that’s the point.

The technical tension = simultaneous up & down trends vying for dominance.

I’ve seen this type of thing play out many times before across different assets and markets, and the resultant move tends to be violent, substantial, and sets the tone for many years to follow. And I see this setup here as no different. But then you also consider the macro influence of the US dollar, and you realize that this is not just a major issue for asset allocators and traders, but something that could have far reaching impacts.

Up until recently I had been stubbornly bearish on the US dollar (as a medium/long-term cyclical call), but as noted in my latest report I see a window for a rally —what I don’t see yet however is a resolution to this chart. But it’s something I am spending a lot of time on, and watching very closely… and I suggest you do too!

Weekly Report Notes

Here’s the topics & takeaways from my latest report —it should give a good sense of what I tend to cover in the Topdown Pro service as well as providing some high-level insights into how I am currently seeing Macro & Markets:

1. USD: continue to watch for short/medium-term upside risk in the US dollar as technicals, sentiment, positioning turn up, policy pivots, and geopolitical risks loom.

2. Gold: gold technicals have flipped to bullish (from previous bearish), but a number of downside risk flags remain (expensive valuations, crowded positioning, consensus bullish sentiment).

3. Treasuries: compelling contrarian bullish setup in bonds (cheap valuations, bearish sentiment, very low allocations/positioning, high risk perceptions), but still awaiting the macro/technical confirmation.

4. Risk Tables: overall there are plenty of strong and credible upside risks for growth/risk-assets, but there is a slight skew to downside risks, particularly around geopolitics, inflation, rates.

5. TAA Review: continue to favor growth assets (but with nuance: neutral equities, over commodities and REITs), funding by underweight to cash (mild bullish on bonds).