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U.S. dollar index accelerates gains as euro weakens

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Yahoo Finance's Jared Blikre breaks down technical charts for the U.S. dollar index, commodities, and bitcoin.

Video transcript

BRAD SMITH: And Yahoo Finance's Jared Blikre has the chart of the day. Jared, what are we looking at?

JARED BLIKRE: Looking at the Dixie, the US dollar index. This is heavily weighted towards the euro, which by the way, the euro at 20-year lows, and the Dixie is at 20-year highs. This is what has happened year to date, it's up 11%. That is a huge move.

You've got to keep in mind, currencies are non-trending assets for the most part. I'm going to put on a max chart here, this goes back to the '80s, and you can see mostly sideways action, currencies are competing against each other, but they do fluctuate within bands. And you can see right now we have accelerated to the upside. Doesn't look like much but it is a huge move, we have taken out these highs and we are now racing towards this 120 level.

Now, you take a look at the Europe-- the euro excuse me-- which is kind of the opposite here. We can see that the euro has been coming down. Let me put a 20-year chart on here, let's see if we can get this up. There we go, we can see the euro down 15% over the last 20 years.

Now, interestingly, when the experiment started in, what was it, 1999? I believe the euro was set artificially slightly above the dollar, sank below parity, and hasn't been there in 20 years. So what happens at these lower levels? Well, an instructive example is what happened with the Japanese yen back in the day, 2011 I was watching my charts, and this is important to note here because 80 was a huge level in the Japanese yen, hadn't been touched since 1995, so basically, 15 years. And it kind of stuck around this level, broke through, and then it crashed to the upside.

So interesting to see how these currency plays are working out here. And I just want to leave with this board on the commodities. This is what's happening today. I want to show you what has happened over the last month. When we have commodities-- excuse me, when we have the dollar racing higher, that weighs on commodities, natural gas down 40%, oats down 35%, wheat 27%, cotton 28%. And so we can see what happens when the dollar gains strength.

BRIAN SOZZI: Jared, that is some real good stuff there. Very, very helpful on a complicated topic, that is foreign exchange. Maybe you could pull up a chart of Bitcoin. Bitcoin price is back over $20,000 but I remember you mentioned yesterday $3,500 could be in play. I mean, it's not likely, but who knows?

JARED BLIKRE: I'll tell you what, that was the low after the great crash of 20-- what was it 2017 I think? So let's go back five years and capture those highs. Now, it doesn't look like much today, but $20,000 was a huge level back in the day. It was up what? Several hundred, several thousand percent from the lows a few years prior.

Now, what happened it crashed all the way down to $3,500 and then it got up to about-- what was that $13,000? Those are the levels in play here. I don't see it going below $3,500. And in fact, I think $13,000 is a natural floor for it. But it hasn't been hit yet. So maybe it's going to take another exchange failure, I don't know. And it doesn't have to, it could very easily launch from here, we can see $20,000 is getting some play. But you take a look at what's happened year to date, Bitcoin has been consolidating and consistently breaking down very-- excuse me, at least three times here. And I have to think that it could be possible for it to break down another time.

So what are we looking for in terms of a rally? Well, we want to see it break above prior resistance and then hold there. So for instance, let's say it breaks down here, we want to see it hold above $20,000, we want to see it hold above $30,000 here some big levels $40,000, $45,000, but that's the name of the game. The definition of a trend is higher highs and higher lows. We are seeing the opposite of that right here.

BRAD SMITH: Unfortunately, right now 20 seems like the new 30. And we'll see exactly where that move goes to from here. Our own Jared Blikre joining us in studio. Appreciate it, Jared.

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