The US Dollar – Looking For a Bounce

Jon Government

Recent Price Action
The US Dollar Index (DXY) continued to move lower this week having lost another 1.4% from the previous weeks close. This continued move lower came after the DXY had already lost over 8% from the highs that were struck in January. While the Dollar is still getting hammered on both the charts and in the media the DXY is now coming into a fairly strong support zone that should ideally provide at least some temporary relief from the onslaught that the DXY has seen as of late.
Anecdotal and Other Sentiment Indications
Last week I had written about the news that was all over the financial press claiming that US Dollar was down because the Republicans were unable to be able to pass their health care bill. I noted how the pundits were claiming that this was evidence that the ‘Trump Trade’ was breaking down and that the continued uncertainty in the White House would surely cause the US Dollar to continue to fall lower.
This week I am reading that not only do the Republicans need to get their act together to allow the US Dollar back on solid ground but that US Treasury Yields must also move higher before the US Dollar had any chance of bouncing. This is supposedly due to the US Political situation weighing down on US yields which were then in turn not allowing the US Dollar to bounce.
Well even if we were to believe the first argument that, the US Political situation was weighing down on US Treasury yields, one simply has to look at a chart to know that there is no correlation between US Treasury yields and the value of the US Dollar on either a long or even a short term basis. Sometimes they move together and other times they don’t but again there is no consistent relationship suggesting that US Treasury yields have any effect at all on the value of the US Dollar.
So if you are serious about trying to determine what is going to happen next in the market; instead of listening to the pundits attempt to assign causality to something that has nothing to do with the markets, or correlations that clearly do not stand the test of time, wouldn’t it be much easier to simply analyze the market for what it really is and just allow Sentiment to Speak.

This post was published at GoldSeek on Wednesday, 26 July 2017.