This morning’s collapse in the dollar – the biggest daily drop since March 2017 – has extended the 2018 demise to 3.2%, the worst start to a year since 1987.
Despite Wilbur Ross’ efforts to walk-back Mnuchin’s “game-changer” weak-dollar-policy implications, the Dollar Index is in freefall..
After showing some stability for a few days, Mnuchin’s comments extended the plunge that began when The Fed hiked rates in December…
This is the lowest for the dollar since Dec 2014…
It’s notable how the broad dollar indexes tend to stay within the upper and lower Bollinger Bands, which are two standard deviations above/below the 20-day moving average. So the fact the Bloomberg Dollar Spot Index is testing the lower band this morning suggests the weakness may not get too much worse today.
That doesn’t necessarily mean it’s a good time to go long. For one thing, that lower band is pointing decisively downward, so there’s no reason to expect it to cause a rebound in the near future. For another, simply going long following breaches of the lower band and shorting breaches of the upper band has been just about the worst technical strategy this year, according to Bloomberg’s backtest function.
Let’s see if it holds above that lower band today. If there was ever a time to suspect the lower band won’t hold, it’s probably the day the U.S. administration seems to have officially rejected a strong-dollar policy.
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