The Inverse Head & Shoulders in the DXY

We asked our contributor network why they believe the Inverse Head & Shoulders forming in the DXY matters. Here are their responses.

The Inverse Head & Shoulders in the DXY

The US Dollar is to markets what groundswell is to long-period waves – that’s to say it’s one of, if not the most important driver for the entirety of global assets. Therefore, its movements, every bip, is hyper scrutinized by market participants.

With that, there’s currently an ominous pattern forming in the DXY, and the chart has been making its rounds on FinTwit, so we reached out to our network to ask them why this pattern, and why a potential breakout (up or down) matters.

Here’s what they had to say.

Brent Johnson | Santiago Capital | @SantiagoAuFund

Luke Gromen | FFTT, LLC | @LukeGromen

Darius Dale | 42Macro | @42macroDDale

  1. Broad investor demand for safe-haven assets like Treasuries and “high-quality compounders” of dividends and/or secular growth in the deep, liquid US equity market;
  2. Foreign multinational corporations transitioning cash balances to USD in anticipation of local currency depreciation and/or devaluation; and
  3. Shortening rehypothecation chains leading to a decay in the growth rate(s) of leverage for both nonbank lenders and private nonfinancial sector borrowers.

Kevin Kelly, CFA | Delphi Digital | @Kevin_Kelly_II

Tyler Neville | Blockworks | @Tyler_Neville_

Jesse Felder | The Felder Report | @jessefelder

Michael Nicoletos | Executive Advisor | @mnicoletos

That's it for this publication. Hopefully, the USDs moves are put into a bit more perspective and a huge thanks to all of our contributors.  

If you didn't catch our last pub, Charts of the Month, go have at it!

Also, do us a favor and forward this email to some friends. We appreciate the support. Track us down and beers are on us!

Written and Edited between Mexico, Italy (Forza Italia!), and London

No Filter. You're hideous, but I guess I'll stay a little longer. Sayulita, Mexico

Published in: Charts
Tim Purcell

Co-founder & Head of Growth. Covers Energy, Markets, and Geopolitics. Ex-Goldman Sachs IMD, buy & sell side equity research, M&A, and head of strategy for media startup.

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