As of July 20, the dollar index had established a new twoyear (24-month) low and a monthly low that was at least one percent below the previous month’s low. The price action after the 20 other times this has happened since 1990 (April 2004 being the most recent occurrence) is a mixed bag: For the first four months after establishing these lows, the average month-to-month closing price moves were positive but the median moves were negative, which suggests a smaller number of large gains skewed the average higher.
In fact, several of these 24-month lows — especially when two occur back-to-back — have preceded sharp upturns, one of the most notable being the 2005 rally after consecutive 24-month lows with one-percent low-to-low declines in November and December 2004.
After a simple new 24-month low, the dollar index’s trajectory was mixed for the first three months but more consistently upward from months five through eight.
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