Analysts are calling the top for the US dollar.
After a stunning rally of over 20% from mid-2014 through this March, the US dollar index (which measures the dollar against a basket of other major currencies) has slowed its run.
And in a note to clients on Tuesday, UBS analysts Michael Riesner and Marc Müller declared that there’s a “major tactical US dollar top in place”.
They wrote, “Strategically, we called a US Dollar bull market last year and it was and remains our view that, apart from tactical corrections, the Dollar bull market will continue into H2 2016 … Tactically, and on track with our cyclical model, we saw a big reversal in the US Dollar over the last 2 weeks.“
They based their analysis on their proprietary advance/decline line, a charting tool that technical analysts use to measure the number of stocks (or, in this case, currencies) that are moving higher versus those declining. And the analysts’ advance/decline line for the dollar, which measures it against 20 currencies, reversed course two weeks ago.
The dollar is now set to drop for a third straight week.
And a Bloomberg report highlighted something else that technical analysis is saying about the dollar: It has formed a dreaded death cross.
That happens when the 50-day moving average crosses below the 200-day moving average. Basically, technical analysts take it as a bearish sign and a reversal of the currency’s long-term trend.
In the chart below, the blue line is the 50-day moving average, while the red line is the 200-day.
According to Bloomberg, a death cross hasn’t happened to the dollar since September 2013.