- Dollar index’s daily chart shows a golden crossover.
- The bullish cross is a lagging indicator and often marks temporary tops.
The dollar index, which tracks the value of the greenback against majors, could be nearing an interim top, as a big-time lagging indicator has turned bullish for the first time since June 2018.
The 50-day and 200-day averages have produced a golden cross, an indicator of the long-term bull market. The averages, however, are based on past data. Hence, crossovers tend to lag price, especially the longer duration ones.
Put simply, a golden cross is the result of a strong rally and has limited predictive powers at best. More often than not, an asset is overbought by the time the crossover happens and witnesses correction post-crossover confirmation.
The 14-day relative strength index of the dollar index is reporting overbought conditions with an above-70 print. A a result, the DXY may struggle to hold onto gains above 100, if any. On the downside, the 200-hour average, currently at 99.19, could work as strong support.
At press time, the DXY is seen at 99.84.
Daily chart
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Trend: Neutral
