Looming ‘death cross’ spells fear for dollar bulls
October 12, 2012, 10:32 AM
Dollar bulls may soon have something else to worry about. The 50- day moving average (80.73, according to FactSet) on the ICE dollar index .bgChannel, .bgRealtimeChannel, .bgRevision { display: none; }
/quotes/zigman/1652083 DXY -0.11%is within spitting distance of moving below the 200-day moving average (80.69).
To chart watchers, such a development is known ominously as a "death cross."
A death cross is typically taken as confirmation that a major trend change is under way, said Colin Cieszynski, senior market analyst at CMC Markets, in a note. "It confirms the start of a new downtrend and is the opposite of the more commonly known golden cross."
A golden cross occurs when the 50-day moving average moves above the 200-day.
"Today the 50-day and 200-day averages are "Even Steven" but any further decline from here would generate a death cross, a bearish signal for USD. The previous golden cross occurred a year ago, while the last death cross on USD was in September 2010, as expectations of the QE2 program were building," Cieszynski writes.
The dollar index hit its year-to-date peak in on July 24 at 84.005. It now trades at 79.597.
–William L. Watts
