- From a fundamental perspective, it could be assumed that the USD will be moving downward given the ultra dovish initial commentary from Yellen. This is definitely a risk, but considering all the voting FOMC members views on , there is more of a consensus that the taper should have already begun.
- Cyclical, with an insanely overbought equities market, I expect profit taking through the end of the year to further support the USD. As always this is only what I view as the most likely scenario. The alternative scenario should still see the DXY finding support at its most previous swing low.
Not only is divergence showing up on the RSI again along with the stochastic showing a correction is under way, but the correlation between the SPX and DXY appears to be reverting back to its normal inverse relationship. I highlighted a previous occurrence of this from a couple months ago with similar conditions that had some decent follow through.