{"id":19380,"date":"2022-02-02T07:30:42","date_gmt":"2022-02-02T12:30:42","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=19380"},"modified":"2022-02-02T07:30:42","modified_gmt":"2022-02-02T12:30:42","slug":"has-the-dollar-entered-the-death-zone","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/has-the-dollar-entered-the-death-zone\/","title":{"rendered":"Has the Dollar Entered the Death Zone?"},"content":{"rendered":"

Mountain climbers refer to the “death zone” as any altitude above the point where there isn’t enough oxygen to sustain human life.<\/p>\n

This level typically comes in around 26,000 feet. So, if a climber stays at that altitude too long…<\/p>\n

Well, it’s not called the death zone for nothing…<\/p>\n

Financial markets aren’t all that different.<\/p>\n

Many markets have their own death zones – price levels where there’s been a historically high chance of a trend reversal.<\/p>\n

And right now, the U.S. dollar is trading just inside its death zone.<\/p>\n

And while this might be bad for dollar bulls, it’s likely going to be good for assets that move counter to the dollar, such as gold, silver, and other commodities.<\/p>\n

Another beneficiary of a weaker dollar would be foreign currencies that are reliant on commodity exports.<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Some examples of such currencies would include the Australian and Canadian dollars. Both these economies are dependent on commodity exports and would benefit from a weakening greenback.<\/p>\n

That’s why it pays for investors to keep a close eye on what the dollar is doing.<\/p>\n

With that in mind, let’s now check out a two-day chart of the dollar index (DXY)…<\/p>\n

\"Chart\"<\/div>\n

Here’s what’s going on with this chart:<\/p>\n

    \n
  1. \n

    DXY sold off more than 8% the last time it traded around current levels. That was back in June 2020.<\/p>\n<\/li>\n

  2. \n

    The Bollinger Bands<\/a> (blue shaded area between the lines) tell us the dollar’s rally is now extreme. Trading outside the upper band is a signal of the dollar’s overextended condition.<\/p>\n<\/li>\n

  3. \n

    The Relative Strength Indicator (RSI)<\/a> at the bottom of the chart is signaling a bearish<\/a> divergence (blue line marked 3). Divergence occurs when prices make a new high, but the indicator fails to do the same.<\/p>\n<\/li>\n<\/ol>\n

    For example, you can see how DXY made a new high, and so did the RSI back in November. DXY made another new high this time around, but the RSI couldn’t.<\/p>\n

    It’s no secret that the Fed was going to take a more hawkish tone to tame inflation.<\/p>\n

    This has led to the market pricing in a more valuable dollar, which it has done over the last year.<\/p>\n

    From here, sure, the dollar could go a bit higher… but it would have to fight a lot of technical resistance<\/a> every step of the way.<\/p>\n

    The fact is the technical evidence suggests the current rally is close to exhaustion (as I explained with the chart above). A turn in this market is right around the corner.<\/p>\n

    In short, all this tells me the next big move for the buck is likely to be lower, not higher.<\/p>\n

    Happy trading,<\/p>\n

    Imre Gams
    Analyst, Market Minute<\/em><\/p>\n

    <\/p>\n

    Reader Mailbag<\/h2>\n

    In today’s mailbag, The Breakout Alert<\/em> member Xiping shares his thoughts on the S&P 500…<\/p>\n

    \n

    I’m also watching the VIX all the time and agreed with Jeff’s idea of buying last week. I bought more than 10 stocks, made most of my cash working, and I still have a couple of stocks on my buy list and will do it early this week. I believe the S&P 500 is on the way to 5500.<\/p>\n

    – Xiping M.<\/strong><\/p>\n<\/blockquote>\n

    And, Jeff Clark Trader<\/em> member Gary thanks Jeff…<\/p>\n

    \n

    Jeff, I’ve been following you for a few years and really appreciate your consistent daily (and sometimes multiple a day) communication. They’re very helpful.<\/p>\n

    I sure hope you’re right about last week’s close within the Bollinger Bands with this last update. The bottom line is I wanted to express my appreciation for your consistent work. Thank you very much!<\/p>\n

    – Gary R.<\/strong><\/p>\n<\/blockquote>\n

    Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at feedback@jeffclarktrader.com<\/a>.<\/p>\n

    <\/p>\n","protected":false},"excerpt":{"rendered":"

    It\u2019s no secret the Fed was going to do this…<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[76],"newsletter-type":[],"ticker":[],"class_list":["post-19380","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-imre-gams"],"acf":[],"ai_tts_audio_outdated":false,"ai_tts_legacy_post":false,"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19380","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=19380"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19380\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19380"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19380"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19380"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19380"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19380"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19380"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19380"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}