One chart to keep in mind going into FOMC

Callum Thomas

Topdown Charts

As the Fed meets to make its June monetary policy decisions, the consensus (and my view) is that they will hike interest rates again.  This will add to the interest rate differential support for the US dollar and driver further policy divergence.  This comes at a time where the US dollar index has undergone a correction.

The chart puts this correction into context by taking an "analog" view against the late 1990's US dollar bull market.  The chart comes from the latest weekly report where I talked about the US dollar in the context of Renminbi risks.  While analog charts are dubious at the best of times, it does illustrate how the market can trade.  Also my indicators show a positioning reset for the DXY, a move back to more neutral valuation metrics, and ongoing yield support, so maybe another rate hike is all it needs...

Callum Thomas
Head of Research
Topdown Charts

Callum is Head of Research at Topdown Charts. Topdown Charts is a chart-driven macro research house covering global Asset Allocation and Economics.

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