Towards the end of 2016, we had suggested a temporary pause to U.S. dollar's (UUP) explosive rally since election, based on how closely the U.S. dollar Index (DXY) has been following the technical chart patterns from 1999-2000. To recall,
Party Like It's 1999 for the U.S. Dollar
So far, the analog continues to play out nicely to kick start 2017, with the DXY selling off pretty much right from the get-go, down 2.5% since peaking on January 3rd. The euro (FXE) rallied 1.5% while the yen (FXY) outperformed with a 3% gain vs. the U.S. dollar year-to-date. That being said, we believe that the retracement in USD/JPY is nearing its end, as we observed that the strong move off the lows in September last year and the subsequent retracement closely resemble that from the same period in 2014-2015.
(Source: WingCapital Investments)
As illustrated in December's piece, we believe that the…
