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The U.S. dollar has lost momentum just as markets begin to reassess the Fed’s monetary policy stance. The 100 level stands as the last line of defense for the bulls. A decisive break below it could open the door to levels not seen since mid-2021 (~98). A move below the key psychological threshold of 100 could signal a shift in intermarket leadership. Historically, this same zone has acted as a pivot point for rallies in commodities and risk assets. The market is now asking: Will the dollar continue to set the tone? 

After falling from its 2022 high (~114), the DXY has traded within a broad range where markets felt comfortable pushing risk assets to new highs. The bounce off the late-2024 lows failed to reclaim the 61.8% Fibonacci retracement, reinforcing a medium-term bearish narrative. 

The current key support lies between 100 and 101—a psychologically and technically significant zone that has provided a base on several occasions (May 2022, April 2023, December 2023, and now in April 2025). 

DXY vs SPX + Correlation

Here is a subtle signal that troubles me. To understand it, I need for you to first recall that when US stocks start tanking, the US Dollar typically strengthens. Seems counterintuitive that if an economy is faring poorly its currency should strengthen. But the greenback is the exception here. 

The British Pound, the Euro, and the Australian Dollar have all lost momentum against the US Dollar. Why is the dollar strengthening right now? Because enough investors are moving their money out of stocks and into cash. That’s right, plain old cash–even Warren Buffet’s hoarding it.  

When the demand for stocks decreases, and investors are worried about prices going lower, they don’t go putting their money into something other stock, they put it into cash. This drives demand, even if only in the short term, for the dollar. 

The fact that we are seeing the dollar strengthen against other major currencies is a pretty good signal that cash hoarding is in vogue right now. And that means buy-and-hold, for the moment, is out.

It’s been about two years since the last time the inverted yield curve made headlines. Scary predictions of the worst recession yet because of the longest and deepest yield curve inversion on record.  Nevermind that a sample size of four functionally nullifies the meaning of any indicator, pundits and analysts alike were happy to talk about what it could possibly mean. 

Funny thing happened on the way to the recession, the market didn’t drop. With the curve out of the negative territory we are out of danger, correct? 

Not so fast. The last time an inverted curve showed up, it took 11 months before the recession did. Given that the recession indicator (two consecutive quarters of falling GDP) naturally has a 6-month lag, it only makes sense that the impact of inverted yields would take a while to have an impact on the markets. It could still be in the works somewhere between now and the summer months.

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