US Dollar Due To Rally?

Above is the chart of the Powershares DB US Dollar Index Bullish (UUP), with the S&P 500 (^GSPC) superimposed over the chart. You can see that the dollar has declined as the market has rallied. If we are in fact due to correct down in the SP500, then I think you could make the case that the dollar is due to rally also. If there is a sharp correction aka panic/fear, then that should help the dollar even more.

Here’s another interesting chart, UUP (dollar bull fund) with the 30 year yield index (purple line) superimposed. Look at the correlation.

As the yields moved from 4.70 to 2.5%, the dollar rallied. People believed that that world was going to fall apart and they vied for the safe haven US dollar. Now yield has rallied again, up from 2.5% to around 4.5% and the dollar has tanked. Perhaps it’s time for equity markets to correct, the bond market to rally and yields to fall back to 1% or so. If this move happens, look for the USD to move sharply higher again.

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