The theme as presented in NFTRH 687 is for USD’s test of its SMA 50 to be a key driver for the Q1 2022 macro.
A test is just that, a test. Not a conclusion. Today’s bounce from it is not only normal, but anticipated. It is what it does from here that will be important.
As you can see, DXY came short of target #3 but has in essence fulfilled our upside expectations for the rally few thought possible a year ago. That does not mean it has to correct, but it does mean it has earned a correction should one soon begin. So I wanted to show an easier chart to interpret than the multi-currency one usually included in weekly reports.
Should USD lose the SMA 50 and begin to correct I’d look for the area where the SMA 200 is rising toward lateral support. That is the 93 area as noted in NFTRH 687.
Should USD hold here there is still upside target #3 in the 98 area.
Meanwhile, the SMA 50 support test is on for Uncle Buck and not surprisingly commodity currencies CAD and AUD are pulling back from their upside tests of the SMA 50 as resistance.
Side note: long-term Treasury yields are ramping today and this will bear further interpretation as inflation expectations (RINF) and the yield curve are also strong today.