DXY Biggest hike since 2000 enough to turn the USDollar bearish?

The U.S. Dollar Index (DXY) had a sudden stop to its rally yesterday following the 0.50% Rate Hike by the Fed, the strongest since 2000. This sudden stop took place at no other level than the 103.850 (just above actually) 5 year Resistance, which was formed by the January 2017 High. Failure to close above it on the 1W time-frame, can technically be seen as a rejection on a long-term scale. Can this be enough to turn the sentiment from long-term bullish to bearish? Well there are some parameters to consider.

** The markets price events before they happen **
First, the markets tend to price such important macro-economic events, days even weeks prior to an announcement. The market speculated this 0.5 basis points interest rate hike, when Jerome Powell first released it as a possibility. The markets digested the news and now we see the results. On this 1W chart, the orange trend-line represents the Effective Federal Funds Rate. Last time it started moving aggressively, i.e. Fed raising rates, was in December 2016. This was a time that the Fed decided to commit on an aggressive hike policy in order to effectively end the QE era that helped the economy recover from the 2008/09 subprime mortgage crisis. At that aggressive round of hiking, the DXY was exactly on the (Resistance) level it currently reached. This cross-asset analysis shows that if the Fed commits, as they've mentioned, to a new aggressive round of rate raising in order to battle an inflation that is out of hand, the U.S. Dollar turning bearish is a real possibility.

Note that as the chart shows, even though the rates continued to rise for another year, that DXY Cycle ended in February 2018. That is because first, as mentioned above, the markets tend to discount results ahead of news, and second it was around the time of the U.S. - China Trade War that shook economies worldwide.

** The stunning tendency between DXY Cycles **
The charts is also technically informative in the sense that each of the previous two Cycles that got created after rejections on or near the 103.850 Resistance, lasted for 61 weeks (427 days) until they started to reverse upwards again. Such an exact similarity is striking. Using that as guide, we can assume that the new bearish Cycle that DXY may begin, could last until roughly June 2023, where a Higher Lows trend-line is waiting to Support.

Notice the critical part that the Fibonacci retracement levels have in shaping Highs and Lows (Resistances and Supports) these past 6 years.


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