MARKET ANALYTICS TEAM, MARCH 24, 2017
Invest Up Sentiment Indicator for the US Dollar - NEUTRAL
The Invest Up Sentiment Indicator for the US Dollar declined in this month. The indicator now stands at 65.23, down from 73.57 in the previous month.
Rated NEUTRAL, the current reading of 65.23 indicates that the sentiment is not extreme in the USD market.
The indicator is designed for investors to detect irrational greed and fear in the USD market. Our econometrics research shows that one of the best ways to forecast whether the US dollar will go up or down is to assess whether investors are excessively bullish or bearish. Extreme bullishness and extreme bearishness is often followed by a strong price movement in the exact opposite direction.
The indicator is expressed in a range between 0 and 100. A figure below 30 is rated FEAR and associated with excesses in bearish sentiment resulting from investors' fear of uncertainty. On the other hand, a value higher than 70 is rated GREED and associated with excessive bullishness and greed in the USD market. Historically, the GREED and FEAR ratings have had strong correlations with turning points in the USD market. A rating of GREED, indicating excesses in bullish sentiment on the part of most USD investors, often leads to a topping in the market and a downside correction. Similarly, a rating of FEAR, indicating high pessimism on the part of most investors, often leads to a bottoming in the USD market and an upside reversal.
Using the indicator as a guide, investors will be able to dynamically adjust exposures in the US dollar, tactically avoid long positions when the market appears overbought, and enter the market when the indicator signals an attractive buying opportunity.