We looked at the DXY recently and felt it was on the verge of a major move to the upside, and today we have an upside breakout.

“The yield on the US 10-year Treasury note rose about 7 basis points to 4.45% on Monday, its highest level in roughly a month, as risk appetite improved following news that the US and China agreed to substantially reduce tariffs. Under the 90-day agreement, the US will cut tariffs on Chinese goods from 145% to 30%, while China will lower levies on US imports from 125% to 10%. The announcement boosted investor confidence, signaling a serious intent on both sides to ease trade tensions. Meanwhile, attention is shifting to key inflation data due this week, with CPI and PPI reports expected to offer insights into evolving price pressures and whether the effects of the tariffs are already filtering through inflation. Traders are now pricing in two 25 basis point cuts to the federal funds rate this year, with the first likely in September, down from three rate cuts anticipated just a week ago.” (Trading Economics)

The USD sold off on trade tariffs but is now rallying back hard – the big picture is the US economy is doing better than its rivals, yields are good, and speculators are heavily short, which points to more upside.

The media has been full of hysteria about the USD. Many forecasters were saying it's no longer a safe haven, and that a good yield on bonds was bad! Today, though, we have a big blue candle to the upside. The USD fell mostly on tariff concerns and the idea that the US economy would move into recession, but that's all changed today.

This quote sums up the tariff hysteria well: “I thought the media’s behavior was ridiculous for a couple of reasons. First, as I said, how can anyone expect meaningful change without experiencing some temporary discomfort? Second, I found it downright embarrassing how the slightest downtick in the stock market, a market that has arguably been overvalued for decades, immediately sent analysts and media personalities into a full-blown panic over tariffs before they even went into effect, and certainly before we’d had any chance to negotiate deals.” ( QTR FRINGE FINANCE)

Speculative Positioning 

In our previous article, we pointed out that speculators had gone heavily short the DXY while smart money hedgers had gone long, which pointed to a rebound: You Can Read Our Previous Article Here

In terms of speculative positioning on the COT, we can see it on the chart below which we loaded in the Members Center on Sunday and the expected breakout has now unfolded:

In Conclusion 

The world hasn't collapsed, the USD remains the global reserve currency, and stocks and the USD are soaring. A good close today should see the short covering continue.

Technical Analysis 

Our view of the key levels of support and resistance to look out for below.