Just as the euro posted what looks to be a solid bearish key reversal, the US dollar index ($DXY) looks to have established the flip side of the coin: A bullish key reversal. Here we see the $DXY fell to a new major (long-term) low in September of 91.74 before rallying beyond the August high of 93.99 to a peak of 94.74. Additionally, not only did it easily trade outside the August range, the $DXY also closed above the August high with September’s final settlement of 93.82. Just for fun we can throw in a bullish crossover by monthly stochastics below the oversold level of 20%, just to paint as bullish a picture as possible, technically. Given all these patterns and signals the $DXY should quickly climb to test its upside targets of 94.86 (almost hit in September), 95.82, and 96.79.

The only issue could be fundamentals, with US Fed Chairman Powell consistently saying there will be no interest rate increases occurring over the foreseeable future. However, I think the $DXY can rally without the support of higher interest rates, mostly due to the possibility of global investment money returning to the greenback. Recall from my recent Weekly Column, “Ebb and Flow”, that the various market sectors are in the part of the cycle where stocks have peaked at the US dollar starts to climb. Given this scenario, we will need to keep a close eye on what the S&P 500 does as we start down the treacherous path (for stocks) that is October.