US Dollar Index & Dow Jones Industrial (March-April 2017)

■ Markets: Foreign Exchange, Equity Markets

■ Assets: US Dollar Index (USDX) / US30 (DJIA)

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Global Financial Markets –The General Outlook

After Donald Trump’s election, investors expect high inflation to return in the US. Several factors support this view, including Trump’s policies on tax cuts, increased public investment, and tariffs on imported industrial goods. Lower unemployment and rising wages also boost the chance of higher consumer prices ahead. These inflation expectations create positive momentum for the US Dollar and equity markets.

On the other hand, higher inflation usually means higher interest rates, which signals an end to the bullish bond market of the past 30 years. Since November 2016, about $4 trillion has shifted from bonds to equities.

Regarding equities, the VIX volatility index remains near historic lows, suggesting the equity rally will continue—at least for now.

Chart: CBOE VIX Volatility Chart (S&P500)

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Applying TCI on USDX & Dow Jones Industrial

The Trading Center Indicator (TCI) is applied to the US Dollar Index (USDX) and the Dow Jones Industrial Average (DJIA). The chart below shows the daily TCI signals from November 2010 to March 2017. The USDX chart (top) includes the 89-day simple moving average (SMA), while the DJIA chart (bottom) shows the 144-day SMA.

Chart: TCI on the USDX & US30 (Nov 2010 - March 2017)

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• Short-Term TCI Indications on USDX (Table)

As shown in the TCI chart above, the US Dollar Index is consolidating while the TCI moves within a relatively narrow range. The overall trend for the US Dollar remains bullish, but the momentum is weaker than it was a few months ago.

Below are the daily TCI readings for USDX, along with the forecast for the next 15 trading days (use the slider below to view the TCI table).

TCI (Trading Center Indicator) is an innovative price oscillator developed by TradingCenter. 🔗 More: » About TCI

• Short-Term TCI Indications on Dow Jones Industrial (Table)

TCI clearly shows that the Dow Jones is currently trading at short-term overbought levels, with a recent TCI reading of +8.0%. Note that a TCI level of +10% signals a major overbought market, as seen in the TCI chart. The short-term outlook is negative, but the mid-term and long-term outlook for the Dow remains positive.

Below are the daily TCI readings for the Dow Jones, along with the forecast for the next 15 trading days (use the slider below to view the TCI table).

 

■ Free Forex Trading Signals: USDX

George Protonotarios for TradingCenter

March 13th, 2017