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Action in US Dollar Belies Action in Equities and Bond Yields


As we speak, and in the aftermath of this morning's mostly uneventful Jobs Report, the U.S. Dollar Index (DXY) is pressing on key near-term trendline support at 101.40, which needs to contain the weakness to avert additional pressure that will morph the near-term pattern (off of the March highs at 102.25/26) into a much less friendly set-up.

All of the action during the month of March is grinding into a near-term (Double) Top. For DXY to resume its otherwise longer-term bull trend, it needs to hurdle and to sustain above 102.25, otherwise the price action increasingly suggests that another bout of weakness is approaching within a larger corrective set-up off of the Jan all-time high at 103.82.

What today's action in DXY says about the economy, the next Fed-rate hike, and the intensity of the Fed's intention to hike rates two or three times during 2017 is debatable, but from a macro-market perspective, if the Dollar weakens, my sense is that the market thinks either 1) that the economy is not as strong as everyone thinks, and/or the Trump-growth agenda will take much longer than expected to implement, or 2) that the economy is not as strong as we think, and the Fed intends to push ahead with a three-hike plan that in and of itself will trigger an economic retrenchment.

Market psychology would be so much clearer if the Dollar were screaming higher today!

Whatever the case, all eyes are on the US Dollar after today's Jobs Report, and into Wednesday's FOMC policy statement...

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