Chart Advisor: What is the Dollar Telling Us?

By Manuel Tellechea, CMT

1/ What is the Dollar Telling Us?

2/ DXY vs SPX + Correlation

3/ The VIX is Surging… but the DXY is Falling

4/ Gold Challenges the Dollar’s Role as a Safe Haven 

5/ Semiconductors Test Key Support 

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1/

What Is the Dollar Telling Us?

The U.S. dollar has lost momentum just as markets begin to reassess the Fed’s monetary policy stance. The 100 level stands as the last line of defense for the bulls. A decisive break below it could open the door to levels not seen since mid-2021 (~98). A move below the key psychological threshold of 100 could signal a shift in intermarket leadership. Historically, this same zone has acted as a pivot point for rallies in commodities and risk assets. The market is now asking: Will the dollar continue to set the tone? 

Courtesy of StockCharts.com

After falling from its 2022 high (~114), the DXY has traded within a broad range where markets felt comfortable pushing risk assets to new highs. The bounce off the late-2024 lows failed to reclaim the 61.8% Fibonacci retracement, reinforcing a medium-term bearish narrative. 

The current key support lies between 100 and 101—a psychologically and technically significant zone that has provided a base on several occasions (May 2022, April 2023, December 2023, and now in April 2025). 

2/

DXY vs SPX + Correlation

For the First Time in Months, the Dollar and the S&P 500 Are Falling in Tandem — A Sign of Structural Risk-Off 

The current positive correlation — now at 0.66 — appears to be more a reflection of macroeconomic stress than a sign of healthy alignment. When the dollar and equities stop acting as offsets, the message is usually clear: investors are heading for the exits. 

🔻 Both assets are falling: 

• The DXY is losing momentum after failing to hold the breakout above 106–107. 
• The SPX is also pulling back from all-time highs (~5300). 
• This kind of simultaneous decline is unusual, as historically, one tends to rise when the other falls (risk-on vs. risk-off behavior). 

The correlation indicator confirms it: USD and SPX have been moving in sync. 

• This level of correlation is unusually high for two assets that typically exhibit an inverse relationship. 
• Historically, extreme correlations like this tend to reverse sharply. 

Courtesy of StockCharts.com

🧩 How Should We Interpret This Tandem Sell-Off? 

🅰️ Scenario 1: Flight to Cash 

Investors are liquidating both equities and dollars — a sign of extreme risk aversion. Capital is moving directly into cash or alternative safe havens (gold, sovereign bonds, etc.). 

🅱️ Scenario 2: Broad-Based Macro Repricing 

Markets are simultaneously reassessing: 

• The rate cycle (fading optimism over cuts). 
• The economic outlook (rising concerns about a global slowdown). 

This dual repricing is driving downside pressure on both the dollar (loss of carry advantage) and equities (falling earnings expectations). 

3/

The VIX is Surging… but the DXY is Falling

Despite a sharp spike in volatility, the DXY is not responding with strength as it did in previous crises. This suggests that the market may be interpreting current risk dynamics as qualitatively different, or that the dollar is no longer seen as an unconditional safe haven. 

If downward pressure on the DXY persists while the VIX remains elevated, we could witness a breakdown of key support in the U.S. dollar index — reinforcing the idea of a structural shift in intermarket leadership.

Courtesy of StockCharts.com

This breaks the traditional relationship between these two indicators and could be interpreted as: 

• A sign of structural weakness in the USD (a potential loss of leadership). 
• A shift in preferred safe havens: flows may be rotating into long-duration bonds, gold, or even physical cash (USD cash, not the index). 
• A case of liquidity stress or market dislocation, where asset classes stop reacting in a synchronized manner. 

4/

Gold Challenges the Dollar’s Role as a Safe Haven 

Across multiple cycles (2001, 2008, 2020), there has been a clear negative correlation: when the dollar falls, gold rises. Of Course, this is typical behavior since gold is priced in USD, a weaker dollar makes gold cheaper for foreign buyers, boosting demand. 

Courtesy of StockCharts.com

Since 2022 a partial breakdown in that Relationship. Even during periods of dollar strength, gold has continued to rise aggressively, especially from 2023 to 2025. This suggests that gold no longer relies solely on dollar weakness to appreciate. 

Potential drivers behind this dynamic include: 

• Expectations of structural inflation. 
• Growing distrust in traditional financial assets. 
• Reserve accumulation by non-Western central banks. 

5/

Steepening After Inversion — What the Bond Market Is Telling Us 

📊 Technical Take: 

1.

The 10Y–2Y yield spread has emerged from a deep inversion. The curve reached a low of -1.06%, one of the deepest inversions in recent decades. It now sits at +0.55%, confirming a return to positive slope (steepening).This is typically the second phase of the yield curve cycle — when the curve un-inverts right before or during a recession.

Courtesy of StockCharts.com

2. Historical context: post-inversion ≠ relief. In previous cycles (2000, 2006, 2019), the yield curve normalized before equity markets experienced significant drawdowns. A steepening curve has historically been a lagging signal, not a sign of resolution. 

Intermarket signals appear to be aligning: a weakening dollar, a yield curve steepening after a historic inversion, and gold pushing to new highs. Taken together, these moves suggest that the market may be entering a new phase—one potentially defined by rising risk aversion, a shift in macro leadership, and a redefinition of traditional safe-haven assets. 

However, the decisive factor may lie in the political arena: the course the United States takes on fiscal, monetary, and trade policy—including the potential implementation of new tariffs—could ultimately determine the next major move in global markets. 

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Originally posted 11 April 2025