Last quarter was the largest quarterly gain for DXY since Q1 of 2015, and the third largest quarterly gain for the Dollar index in the past 30 years.
By :James Stanley, Sr. Strategist
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It was a strong Q4 for the U.S. Dollar, which stands in stark contrast to the weakness that the currency showed in Q3 of last year. As the Fed laid the groundwork for rate cuts in the first two months of Q3, the U.S. Dollar dropped in precipitous fashion, eventually landing around support in early-September that DXY bears had difficulty breaking through. And while the Fed did start their cutting cycle in September, there was a building case for reversal, as shown via a falling wedge formation and divergent RSI.
That falling wedge broke out in a big way as Q4 began, and then DXY got another shot-in-the-arm around the U.S. Presidential election in November, helping the Dollar to climb and finish 2024 trade at fresh two-year-highs.
But, to put last quarter’s move in scope, it was the largest quarterly gain for DXY since Q1 of 2015; and the third largest quarterly gain since Q4 of 1992.
On the below chart, I’ve marked some of the largest quarterly gains in DXY since the Plaza Accord in 1985. Last Q4 of 2024 would be the sixth largest quarterly gain since the top was set in 1985 trade.
Chart prepared by James Stanley; data derived from Tradingview
The Euro came into inception in 1999 and given that the single currency is a whopping 57.6% of the DXY quote, we can reasonably say that this was the third largest quarterly outing in the U.S. Dollar since the Euro came online.
But perhaps more pressing is the backdrop with which that move showed up: The U.S. Dollar and EUR/USD were exhibiting a relatively clean range for much of the past two years. And last quarter’s breakout in DXY brought with it the prospect of continuation as we move into 2025 trade. Along the way a massive level was taken out in the U.S. Dollar at 106.61, which is the 38.2% Fibonacci retracement of the long-term move in DXY. This level held as important in 2023, as we’ll see below.
Chart prepared by James Stanley; data derived from Tradingview
That 106.61 level in DXY was a big spot in 2023 trade. At the time, the U.S. Dollar had strung together eleven consecutive weeks of gains, rallying from a fresh yearly low in July until the Fibonacci level came into play. And that level was a hard stop for bulls – holding the weekly high for six consecutive weeks, with each weekly bar showing some intersection at that price but none able to lead to a bullish continuation move. I’ve marked this area in red on the below chart.
In the most recent breakout, it did help to hold one weekly high but bulls continued to push in the aftermath of the election, eventually finding resistance at the 108.00 handle.
Chart prepared by James Stanley; data derived from Tradingview
While the U.S. Dollar has shown symptoms over overbought conditions there’s still no sign yet that the bullish run is over.
This week started with a fast sell-off in DXY, driven by the prospect of Trump softening on tariffs. But that theme seemed to be refuted early in the U.S. session which helped the USD to hold support around the 108.00 level.
On a bigger picture basis, it’s difficult for me to imagine both stocks ripping-higher and the U.S. Dollar continuing its bullish trend and as I said in this quarter’s equity forecast, my expectation is for some element of mean reversion to show in the USD as stocks continue to exhibit some element of strength.
Price action, at this point, does not show that, however. And on that note, it’s the 106.61 level, the same long-term Fibonacci level noted above, that I’m looking to for some element of strategy around DXY this quarter. If sellers can take that level out, then bigger picture mean reversion will begin to look more attractive, in my opinion. But, until that’s the case, bulls still have a claim towards topside biases.
From the below daily chart, we can see that today’s low held above the prior swing low around 107.72. There’s a confluent zone of Fibonacci levels plotted from 107.18-107.32; that’s the next support zone that I’m tracking.
Chart prepared by James Stanley; data derived from Tradingview
— written by James Stanley, Senior Strategist
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Last quarter was the largest quarterly gain for DXY since Q1 of 2015, and the third largest quarterly gain for the Dollar index in the past 30 years.
From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.
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By :James Stanley, Sr. Strategist
US Dollar Talking Points
- The US Dollar just posted its largest quarterly gain since 2015, with a 7.67% move in Q4 of 2024. This is also the third largest quarterly gain in the past thirty years.
- There were multiple drives as that rally last quarter stands in stark contrast to the sell-off in Q3:The currency came into last quarter with a falling wedge that led to strong bullish breakout, and the election in November gave another topside push to the USD.
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Indices FY 2025 Market Outlook - City Index AU
US equities soar on AI-driven optimism and dovish Fed policies, but rising valuations and fiscal concerns could test the rally. Will tech and policy dynamics extend the bull run?
It was a strong Q4 for the U.S. Dollar, which stands in stark contrast to the weakness that the currency showed in Q3 of last year. As the Fed laid the groundwork for rate cuts in the first two months of Q3, the U.S. Dollar dropped in precipitous fashion, eventually landing around support in early-September that DXY bears had difficulty breaking through. And while the Fed did start their cutting cycle in September, there was a building case for reversal, as shown via a falling wedge formation and divergent RSI.
That falling wedge broke out in a big way as Q4 began, and then DXY got another shot-in-the-arm around the U.S. Presidential election in November, helping the Dollar to climb and finish 2024 trade at fresh two-year-highs.
But, to put last quarter’s move in scope, it was the largest quarterly gain for DXY since Q1 of 2015; and the third largest quarterly gain since Q4 of 1992.
On the below chart, I’ve marked some of the largest quarterly gains in DXY since the Plaza Accord in 1985. Last Q4 of 2024 would be the sixth largest quarterly gain since the top was set in 1985 trade.
U.S. Dollar 3-Month (Quarterly) Chart
Chart prepared by James Stanley; data derived from Tradingview
U.S. Dollar Big Picture
The Euro came into inception in 1999 and given that the single currency is a whopping 57.6% of the DXY quote, we can reasonably say that this was the third largest quarterly outing in the U.S. Dollar since the Euro came online.
But perhaps more pressing is the backdrop with which that move showed up: The U.S. Dollar and EUR/USD were exhibiting a relatively clean range for much of the past two years. And last quarter’s breakout in DXY brought with it the prospect of continuation as we move into 2025 trade. Along the way a massive level was taken out in the U.S. Dollar at 106.61, which is the 38.2% Fibonacci retracement of the long-term move in DXY. This level held as important in 2023, as we’ll see below.
U.S. Dollar Monthly Chart
Chart prepared by James Stanley; data derived from Tradingview
U.S. Dollar Range
That 106.61 level in DXY was a big spot in 2023 trade. At the time, the U.S. Dollar had strung together eleven consecutive weeks of gains, rallying from a fresh yearly low in July until the Fibonacci level came into play. And that level was a hard stop for bulls – holding the weekly high for six consecutive weeks, with each weekly bar showing some intersection at that price but none able to lead to a bullish continuation move. I’ve marked this area in red on the below chart.
In the most recent breakout, it did help to hold one weekly high but bulls continued to push in the aftermath of the election, eventually finding resistance at the 108.00 handle.
U.S. Dollar Weekly Price Chart
Chart prepared by James Stanley; data derived from Tradingview
U.S. Dollar Shorter-Term
While the U.S. Dollar has shown symptoms over overbought conditions there’s still no sign yet that the bullish run is over.
This week started with a fast sell-off in DXY, driven by the prospect of Trump softening on tariffs. But that theme seemed to be refuted early in the U.S. session which helped the USD to hold support around the 108.00 level.
On a bigger picture basis, it’s difficult for me to imagine both stocks ripping-higher and the U.S. Dollar continuing its bullish trend and as I said in this quarter’s equity forecast, my expectation is for some element of mean reversion to show in the USD as stocks continue to exhibit some element of strength.
Price action, at this point, does not show that, however. And on that note, it’s the 106.61 level, the same long-term Fibonacci level noted above, that I’m looking to for some element of strategy around DXY this quarter. If sellers can take that level out, then bigger picture mean reversion will begin to look more attractive, in my opinion. But, until that’s the case, bulls still have a claim towards topside biases.
From the below daily chart, we can see that today’s low held above the prior swing low around 107.72. There’s a confluent zone of Fibonacci levels plotted from 107.18-107.32; that’s the next support zone that I’m tracking.
U.S. Dollar Daily Chart
Chart prepared by James Stanley; data derived from Tradingview
— written by James Stanley, Senior Strategist
A Tops Down Technical Look at the USD After Largest Quarterly Gain Since 2015
Last quarter was the largest quarterly gain for DXY since Q1 of 2015, and the third largest quarterly gain for the Dollar index in the past 30 years.
From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.
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