The market initially seemed to expect the Strait of Hormuz disruption to fade quickly, much like last year’s Iranian missile retaliation, but that has not happened. Shipping disruptions have persisted, oil has surged, and investors are paying much closer attention to the inflation and growth risks that come with a prolonged energy shock.
What has changed even more is the dollar. After spending much of the past year in a weak trend, the greenback has started to behave very differently since the Strait disruption. With higher oil feeding inflation concerns, rate-cut expectations for this year have been pushed back sharply, and the market is now pricing in very little easing from the Fed, which is helping support dollar demand. If the next Fed chair also turns out to be more focused on balance-sheet tightening, then concerns over dollar liquidity could become an even bigger macro theme.
First, traders should be careful about the risk of a sharp upside pulse in the U.S. Dollar Index and watch the opportunity in euro futures.
Based on my dollar cycle model, March has already opened a key observation window for a potential reversal higher in the dollar. The U.S. strike on Iran and the resulting Strait blockade have become a clear catalyst for that move through the oil channel.
Historically, the final stage of a dollar downcycle is often followed by a fast, aggressive rebound that can last three to four months and push the index up by 15 to 20 points. If we take the recent low near 95 as the reference, then a move toward 110 is not impossible. If that happens, it would likely create pressure on precious metals and U.S. equity indices.
The futures contract most closely tied to this view is CME euro futures, 6E. Since the euro carries more than half the weight in the Dollar Index, a stronger dollar usually means a weaker euro, which makes euro futures an obvious bearish expression of the trade. I mentioned this setup during last Thursday’s livestream and highlighted that a break below the neckline would favor short euro positions. So far, that idea still looks valid.
For traders already short euro, I think the position can still be held. For those not in yet, it may still make sense to scale in gradually with small sizing. If the Dollar Index really does extend toward 110, EUR/USD could retest parity, which would imply a move of more than 15% from prior levels, a meaningful swing for a major currency pair. As for risk management, the recent swing high in euro futures can serve as a stop-loss reference, while profit-taking can be based on the 20-day moving average or a move in EUR/USD toward 1.00.
$欧元主连 2606(EURmain)$ $欧元2603(EUR2603)$ $欧元2606(EUR2606)$ $日元主连 2606(JPYmain)$ $日元2603(JPY2603)$ $美元指数(USDindex.FOREX)$ $美元ETF-PowerShares DB(UUP)$
$20+年以上美国国债ETF-iShares(TLT)$ $微型超10年美债主连 2606(MTNmain)$
Second, U.S. equity indices have now spent two weeks below the 20-week moving average. The decline is still not especially deep, but U.S. indices often accelerate on the downside once momentum turns, so I do not think this is the time to rush into bottom-fishing.
As long as the Strait remains blocked and oil stays elevated, the stagflation narrative remains a headwind for equities. That said, with the midterm election becoming a major political priority for Trump this year, policymakers are unlikely to sit by if the market starts to weaken too aggressively. That makes a full-blown equity collapse less likely, at least for now.
From a technical perspective, the real bull-bear dividing line is the 20-month moving average, which is around 6,250 on the S&P 500. If the market reaches that zone and we also get a catalyst such as a reopening of the Strait or signs of U.S.-Iran talks, that may be a better point to think about buying the dip.
$标普500ETF(SPY)$ $SP500指数主连 2606(ESmain)$ $道琼斯指数主连 2606(YMmain)$ $微型道琼斯指数主连 2606(MYMmain)$ $道琼斯(.DJI)$ $纳指100ETF(QQQ)$ $纳斯达克(.IXIC)$ $NQ100指数主连 2606(NQmain)$
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