Following the June 23rd UK referendum where Brits voted to leave the EU, the US Dollar Index saw an initial spike of over 2%. That rally took the index right up to its 200-DMA, which is a level that it had been trading beneath since early March. Following that initial post-Brexit spike, though, the Dollar Index couldn’t quite muster the strength to take out its 200-DMA and traded in a sideways range for more than three weeks. In a tweet yesterday, we noted that in addition to its 200-DMA, the Dollar Index was also testing its downtrend from the late 3015 highs.
Today, the US Dollar Index took out its first resistance level at the 200-DMA and is currently trading just below that downtrend line. If it can take out this resistance level in the next few days, just like it did with the 200-DMA today, it should set the stage for a continued run higher and validate the argument that investors around the globe are moving capital into the US as it acts as a safe haven on a relative basis.