Is the current USD strength sustainable? Sunday 7 March 2021

There is something about the recent USD strength that is worth investigating. Both USDCHF and USDJPY have recently been found themselves in the “Buy the Dip” regime according to my model.

The below two charts are two statistically significant swings that have been identified by the Eff. Test for USDCHF. The conclusion is that, historically, the period between 1 and 2 months post the signal, USDCHF has experienced an average 1.8% rally. Thereafter, a 2 month period with an average 3.8% decline has ensued.

For the USDJPY we see that “Buy the Dip” is historically a somewhat immediate trend-continuation signal albeit the last 10 culminations have led to the thin red line i.e. an immediate reversal in the uptrend (a good reminder that there is no free lunch here).