Dollar Down Opens Broader Range of Investment Opportunities

Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here.

The dollar's recent dip, along with a pivot to small-cap growth, has been a breath of fresh air. It's given us a chance to look beyond the steady emphasis on Nvidia and consider a broader range of investment opportunities.

For those brand new to the financial markets, it's key to understand the relationship between the US dollar index (DXY) and commodity prices. Typically, as the DXY rises, indicating a strengthening dollar, commodities tend to become more expensive in other currencies, dampening demand. Conversely, a weakening dollar can make commodities less expensive globally, potentially boosting demand. This inverse correlation happens independently of the actual supply and demand dynamics of the commodities themselves, and while a massive oversimplification, this rule generally holds.

With this context, it's worth noting some currency pairs and commodities that have begun to show new bullish momentum and are worth monitoring, including British Pound to Swiss Franc (GBP/CHF), Palm Oil, Copper, Silver, and Palladium. This isn't a green light to invest in them immediately, as they appear overbought in the short term. However, these assets are worth considering on pullbacks in the coming months.

Learn more about the Market Situation Report written by Tier 1 Alpha.