The U.S. dollar has been matching the equities market nearly all year. There are some skeptics that believe the dollar rally will soon be over, but I believe there will be only pauses as the dollar will remain the reserve currency in this global weakening.
Analysts believe that the Federal Reserve will move forward with stimulus and that this could hurt the U.S. dollar valuation, but the dollar has continued to move forward regardless of what the Fed is doing. Conversely, the strong dollar may allow the Fed to continue on with it’s monetary policy until the economy shows that it needs change.
There seems to be a old financial paradox that the dollar should be inverse of the equities markets, yet it is not. Quantitative easing has changed that paradigm. The reason, in my analysis, is that the equities markets are at all-time highs merely due to the Fed’s policy, and the dollar strength comes from the repeated poor economic performance the U.S. has seen the last several years. Given the Fed’s attempt to better the economy through easing, the economic has been stagnating greatly and even seems to be worsening of late with very poor manufacturing and unsteady jobs reports.
The dollar has been range bound and trading within a sideways channel. It just hit the wall at the top of the trend line around 84.25 and is currently printing 83.845 (at time of writing). Demand zones near 83.65 and potentially 83.15-83 near the bottom can provide momentum to the upside to retest that two year high of 84.24. If broken, the dollar could see room to 85.