DXY Daily cautiously bearish. Recommended ratio: 25% DXY, 75% Cash. *US Treasury Secretary Janet Yellen was interviewed by NBC and explained that due to strong consumer demand, credit quality and employment, the widely anticipated two consecutive quarters of negative GDP would not constitute a recession. She is essentially the White House mouthpiece for the state of the economy and is saying that a healthy labor market and a strong consumer (she's referring to growing retail sales, positive GDI growth and "healthy" consumer credit) are currently saving the US from an economic recession. The Consumer Confidence Index (the leading gauge of US consumer confidence) is scheduled to report tomorrow (07/26) at 10am (EST), it has fallen for the past two months and is now at the lowest level since February 2021. The University of Michigan Consumer Sentiment Index is currently projecting a rise in confidence from June to July and is scheduled to report at 10am (EST) on 07/29. With increases in layoffs and announced slowdowns in hiring I'm legit curious to know how the Employment Situation looks on 08/05; both the Federal Reserve and the US Treasury Department are notorious for relying upon lagging data, time will tell if this is one of those cases. With regards to the DXY there are two bullish catalysts at work here: 1) continued geopolitical turmoil and the resulting supply chain disruptions (leading to food and energy shortages) are pushing investors to US treasuries and 2) increases to FFR spillover into increases to overall economic rates, which typically push those looking for higher rates of return to dollar-denominated assets which in return pushes DXY higher. The current consensus on the EOY FFR from both money markets and FOMC members is around 3.25-3.5%, we are currently at 1.5%-1.75% (effective is currently 1.58%). That said, if the projected increases in FFR are to in fact take place AND the global geopolitical/supply chain situation continues to worsen, it would be reasonable to see DXY at 2000-2002 levels (~$120). Reminder that there was a "technical" US recession from March 2001 to November 2001.* Price is continuing to trend down at ~$106.50 after being rejected by $108 resistance; it is also forming a Bull Flag and may attempt to retest $108 resistance in the near term. Parabolic SAR flips bullish at $108.57, this margin is neutral at the moment. RSI is currently trending down at 52 and is beginning to form a soft trough after getting rejected by 59 resistance; the next support is the uptrend line from July 2020 at ~45. Stochastic remains bearish and is currently forming a trough as it attempts to cross over bullish at max bottom. MACD remains bearish and is currently testing 0.65 support with no sign of trough formation. ADX is currently trending down at 34 with no sign of trough formation as Price continues seeing selling pressure, this is mildly bearish at the moment. If Price is able to bounce here at ~$106.50 then it will likely retest $108 resistance. However, if Price continues to break down, it will likely retest the 50 MA (for the first time since May) at ~$105. Mental Stop Loss: (one close above) $108.
"The NBER's definition emphasizes that a recession involves a significant decline in economic activity that is spread across the economy and lasts more than a few months. In our interpretation of this definition, we treat the three criteria—depth, diffusion, and duration—as somewhat interchangeable. That is, while each criterion needs to be met individually to some degree, extreme conditions revealed by one criterion may partially offset weaker indications from another."