With today’s rate hike by the US Fed, the dollar got a strong bid. Where exactly do we stand now, and is this meaningful in the bigger picture or not?

The short answer to this question is YES.

The longer answer is based on the chart setup. The weekly dollar chart makes the point. The dollar is  not only trading at multi-year highs, after today’s strong rise, it also broke through a strong resistance point (100 to 101 points, as indicated with the upper horizontal purple line).

Investors should not underestimate the importance of this. To us, it menas that the dollar is now officially in a new bull market. After a consolidation of 2 years, it is now starting to move higher. In other words, this is the start of a new upleg.

This viewpoint is in line with our market outlook 2017. In it, we made the point that yields have still some upside potential. As yields are the leading indicator for markets, suggesting risk is on, it implies that gold and the Yen will be struggling in the foreseeable future. As a result of that, it ‘makes sense’ to have a rising dollar.