As I wrote earlier today, the USD Index is moving back and for today. This means that my previous comments on the above chart remain up-to-date:
It’s trading in the same tight trading range as before, but the move up is noteworthy, as it took the USDX back above the April low and the upper of the declining support lines. The lower line simply held, and the move below the upper one was just invalidated.
The USD Index is ready to rally. When will that rally finally launch? Nobody can tell with certainty. Perhaps it will be the interest rate decision that triggers the rally even if it’s a widely-expected cut. After all, markets tend to move on rumor (they already did) and then reverse based on the actual event. In the USD Index’s case, it could be the case that it simply refused to decline further based on the rate cut semi-announcement – thus showing strength.
However, given the current bullish setup, I wouldn’t be surprised to see a rally in the USD Index even before the rate cut. This, of course, would likely trigger declines in precious metals and mining stocks.
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Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief