As Hedgeye CEO Keith McCullough often says: “Get the U.S. dollar right, get Macro right.” And this week, we may be witnessing the early signs of a regime shift as the U.S. dollar approaches its cycle-to-date low of $97.86.
“Today is a higher low. It’s a higher low for the U.S. dollar,” McCullough explained.
“The risk range has a higher low implied in it. It’s not bullish trade yet. But a bottoming process would be defined as a higher low and an immediate term trade breakout, then the trend breakout.”
The risk range low on the day was $97.96, just ten cents above the cycle closing low of $97.86.
After remaining bearish on the U.S. dollar since February, a key signal has started to suggest a phase transition that could mean a more bullish environment for the dollar - and we didn't need a geopolitical crisis to know about it.
“Look at what picked up an inverse correlation to the dollar this morning. Spy monkey. Oh, yeah. Climbing up the tree, that monkey is. Spy monkey is now inversely correlated. Like gold is to the dollar. Now, gold is. So that’s new. But that again would be a Quad 4.”
Quad 4, in Hedgeye terms, is the macro regime where both growth and inflation slow, often favoring long-dollar positioning once confirmed.
"The first step of a bottoming process is higher lows. The second step is breaking out through this level here. This is called a phase transition…"
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