Last week, an analysis was reported by some renowned news media, pointing out the “death cross” in the daily chart of the U.S. Dollar
Index (DXY). Such cross occurs when the 50-day moving average crosses
below the 200-day moving average. It also predicted that DXY is possible
to slump.To get more news about
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Such bearish technical formation which reflects future market trend,
from my point of view, is not worthy of worry. The reason lies in the
results of the same situation last time. On December 30, 2019, the
“death cross” occurred. In an ironic twist, however, DXY rebound
dramatically to 99.91 after it reached its bottom at 96.35.February 21
witnessed a golden cross when the 50-day moving average rose above the
200-day moving average. Ironically, DXY plunged to 95.00 after it peaked
at 99.91.
Such golden cross and death cross occurred are both wildly inaccurate.
The theory as a joke may be accurate once the viewpoints are exchanged.
In the session of technical analysis, I‘ve shared my opinions on the
crossovers and held that the 50/200 crossover is not the best-performing
moving average (keep you guessing). Thus, I won’t adopt the death cross
to estimate how DXY performs in the future market.
DXY came under downside pressure in the short run because of the
bullish trend in U.S. stock markets rather than the rationales proposed
by Roach, nor the death cross occurred. In addition, such divergence
between DXY and U.S. stock markets will be dominant over the short term,
with its references among the three U.S. stock indices lie on the DJIA
and the S&P 500 rather than the Nasdaq composite index. Thus, it is
necessary to analyze the continuing effect of the two indices on DXY in
the short term. But in the long run, the main factors affecting DXY will
remain to be traditional basic ones such as politics, economics and
monetary policies.
