Storm clouds are gathering over the U.S. dollar, threatening a two-year rally in the currency that has squeezed corporate profits and angered President Donald Trump. Dollar bullishness in future markets stands at its lowest level in more than a year-and-a-half, according to the most recent data from the Commodity Futures Trading Commission measuring the net dollar amount of bets on a rising greenback.
Analysts at Bank of America Merrill Lynch say the dollar triggered a so-called “Death Cross” on the last day of 2019. The bearish technical formation occurs when the 50-day moving average crosses below the 200-day moving average, something that has been followed by a period of dollar weakness in seven out of eight instances since 1980, the bank said in a recent report. Easing worries over global trade and Brexit are stoking investor appetite for risk, pushing them out of safe haven assets like the dollar, said Mark McCormick, global head of foreign exchange strategy at TD Securities.
Because of the dollar’s central role in the global financial system, gauging its path is important for corporations and investors. Over the last several years, the currency has withstood a number of factors that analysts believed would pull it lower, including a dovish turn by the Federal Reserve and fears of a U.S. growth slowdown. The ICE Dollar Index edged 0.2% higher last year and was up around 10% from its 2018 low.