Chart Of The Week: US Dollar alligator’s jaws

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Chart Of The Week: US Dollar alligator’s jaws

This week it’s the US Dollar Index.  Unless you’ve been living under a rock (or maybe that saying should be updated – unless you’ve been living out of range of wifi), you will have noticed 2 key things about the US dollar index: 1. The US dollar bull market seemed to end at the end of 2016; and 2. A violent short-squeeze kicked off in April.

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Q1 hedge fund letters, conference, scoops etc, Also read Lear Capital:

But while I certainly would agree that it has all the classical signs of a short-squeeze, I would be quick to point out that there may be a little more to it than that.  The chart of the week comes from a report on the outlook for the US dollar (which also dealt with the implications for crude oil prices).  The chart shows my composite yield support indicator for the US dollar against the DXY, with a substantial gap... "the alligator's jaws".

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VolatilityContinued from part one... Q1 hedge fund letters, conference, scoops etc Abrams and his team want to understand the fundamental economics of every opportunity because, "It is easy to tell what has been, and it is easy to tell what is today, but the biggest deal for the investor is to . . . SORRY! Read More


That yield support indicator includes the signal from 10-year bond yield differentials, and a combination of nominal, real, and shadow policy rate differentials.  So it provides a broad and signal-intensive view of the direction and magnitude of yield support for the US dollar.  Coming out of such a large price adjustment, and a situation where futures positioning had moved from crowded longs to crowded shorts, when you add in the chart above it makes you think that this could be more than just a short squeeze.

There have been a number of occasions in history where the US dollar goes through a turning point, and the does make the transition between bull vs bear market... but in the process has a substantial "last laugh" move.  And I think that there is a real risk that what we are seeing now is the initial stages of precisely that kind of move.

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Article by Callum Thomas, Top Down Charts

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Topdown Charts: "chart driven macro insights" Based in Queenstown, New Zealand, Topdown Charts brings you independent research and analysis on global macro themes and trends. Topdown Charts covers multiple economies, markets, and asset classes with a distinct chart-driven focus. We are not bound by technical or fundamental dogma, and instead look to leverage any relevant factor to capture the theme. As such, here you will find some posts that are purely technical strategy, some that just cover economics and data, and some posts that use multiple inputs to tell the story and identify the opportunities. Callum Thomas Head of Research Callum is the founder of Topdown Charts. He previously worked in investment strategy and asset allocation at AMP Capital in the Multi-Asset division. Callum has a passion for global macro investing and has developed strong research and analytical expertise across economies and asset classes. Callum's approach is to utilise a blend of factors to inform the macro view.

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