‘Death Cross’ Could Indicate a Major Sell-Off Which Threatens the US Dollar

Analysts are warning that storm clouds are gathering over the USD, which threatens a two-year rally in the currency which has squeezed corporate profits and unsettled the US President Donald Trump. The Dollar’s bullishness in future markets currently sits at the lowest level in more than a year and a half, according to data from the Commodity Futures Trading Commission, as they measure the net dollar amount of bets on a rising greenback.

‘Death Cross’ triggered on last day of 2019, could threaten the USD
Analysts at the Bank of America Merrill Lynch note that the USD triggered a so-called ‘Death Cross’ on the last day of 2019. The bearish technical formation occurs when the 50-day moving average cross below the 200-day moving average. This is something that has been followed by a period of USD weakness in seven out of eight occurrences since the 1980’s.

Easing global concerns could send investors looking elsewhere as risk appetite increases
With concerns for global trade now on the mend and the Brexit process looks to be making progress, though it is still very early days, the USD could lose out as investors push out of their safe haven assets like the USD.

USD’s strength may be working against itself in the global trading market
Due to the large role that the USD plays in the global financial system, gauging its path is crucial for corporations and investors. Over the past couple of years, the currency has remained rather resilient and has overcome many factors which analysts believed would pull it down like a dovish turn by the Fed Reserve and fears of a US growth slowdown. But it now appears that the USD’s strength may be working against it. US President Donald Trump recently complained that the USD’s strength makes US products less competitive abroad. An index which measures the USD against currencies of the largest US trading partners stands near an all-time high.

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