After worst than expected CPI data, yield shot up, index futures crashed...but some might be able to spot that DXY didn't really have a reaction to the upside, which was very interesting and gave us a big hint into the epic intra-day reversal we saw. We need to look into yield, interest rate expectation, but also the major currencies in the DXY, EUR, JPY and GBP.
Long story short, EUR, JPY and GBP all sitting at multi decade support level, it seems to me that it is not logical to continue to bet on depreciate of these currencies and we have to consider the possibility of even a respectable bounce, which will take the DXY lower. It would be interesting to see how DXY react to these two trend line support should we reach them, before these 2 lines of support are broken, its still too early to confirm the top in DXY. Some of my scenarios are:
1) DXY topping, DXY go side way at these level for weeks or even months. Bullish for risk assets. (most likely imo)
2) DXY continue to go up and major currencies continue to breakdown. Bearish for risk assets. (less likely imo)
3) DXY has topped and it breaks down rapidly. Bullish for risk. (most unlikely)
Long story short, EUR, JPY and GBP all sitting at multi decade support level, it seems to me that it is not logical to continue to bet on depreciate of these currencies and we have to consider the possibility of even a respectable bounce, which will take the DXY lower. It would be interesting to see how DXY react to these two trend line support should we reach them, before these 2 lines of support are broken, its still too early to confirm the top in DXY. Some of my scenarios are:
1) DXY topping, DXY go side way at these level for weeks or even months. Bullish for risk assets. (most likely imo)
2) DXY continue to go up and major currencies continue to breakdown. Bearish for risk assets. (less likely imo)
3) DXY has topped and it breaks down rapidly. Bullish for risk. (most unlikely)