Rare US dollar signal: When moving averages send a "bullish message" in a declining context

End of 2025 brings an interesting surprise on the technical chart of the US dollar index. On December 19, the technical system recorded a significant event: the 50-day moving average crossed above the 200-day moving average, creating the so-called “Golden Cross.” What’s special is that this signal appeared when the 200-day moving average itself was in a declining phase, a rare combination that has occurred only 16 times since 1970.

One of the rarest technical patterns in half a century

To understand better, we need to grasp the nature of moving averages – they are lagging market tools that reflect trend changes based on past data. When a short-term moving average (50 days) crosses above a long-term moving average (200 days), it suggests that buying pressure is consolidating and the trend may shift from weak to strong.

According to data from Bank of America Merrill Lynch, this is the 39th time the US dollar index has exhibited this pattern since 1970. However, what makes this time different is the market context – this Golden Cross is emerging not in an uptrend but amid a declining 200-day moving average.

BofA’s technical strategists point out that, in the 15, 25, 35, and 60 trading sessions following this signal, the probability of the US dollar rising is 80% (meaning 12 out of 15 times historically). This figure is significantly higher than the usual Golden Cross, where the probability of gains ranges from 68-79%.

Historical data and the hidden strength of the signal

Looking at similar past cases, we find compelling evidence. The average increase after this signal appears is about 1.22%, with the median gain even higher at 1.40%. The last time a Golden Cross with the characteristic of the moving averages and also declining occurred was in 2004, when the US dollar experienced about half a year of volatile movements before finding a clear direction.

However, the 2004 event also warns that a “golden” signal does not always lead to a smooth upward trend. During that period, Golden Cross and Death Cross (short-term moving average crossing down) signals appeared repeatedly in a short span, indicating a market in oscillation.

Spillover effects on related markets

The influence of the US dollar does not stop at its own index. When the dollar appreciates, other assets worldwide often adjust accordingly within the global valuation system.

Crude oil is the most sensitive asset to this signal. Historical data shows that, when a Golden Cross occurs amid a declining trend like now, the probability of crude oil prices rising is 100%, reflecting a very strong positive correlation.

US stocks (S&P 500) do not react immediately but tend to strengthen after more than a month, indicating that the market needs time to digest the impact of a stronger dollar.

Gold and government bond yields show no clear trend, suggesting investors may be torn between the traditional safe-haven role of these assets and the pressure from the rising dollar.

The US dollar at a crossroads

These promising technical signals face challenges from macroeconomic realities. DBS Bank notes that since June 2025, the US dollar index has formed a sideways accumulation zone between 96.50 and 100.30, which could be the starting point for a new upward cycle, especially if it can break through the threshold of 100.26.

Conversely, Goldman Sachs warns that the dollar is losing its “safe-haven” characteristic due to three pressures: US policy instability, global capital dispersion trends, and fiscal concerns. UBS forecasts that in Q4 2025, due to expectations of Fed rate cuts, the dollar will continue its weakening trend.

Key points for investors to watch

Currently, the US dollar index is testing the long-term support level around 97. If this level is broken, downside potential could extend to 90/87. Conversely, if it surpasses 100.26, the upward trend could continue toward the 101.55-101.98 zone.

The conflict between the optimistic technical signal (Golden Cross) and the negative fundamental pressures will be resolved in Q1 2026. Investors should not blindly follow a single signal but combine it with broader fundamental analysis.

In summary, the nature of moving averages is a lagging indicator, but when it appears in a special context like now, it offers valuable clues for investors. The higher probability of a US dollar rebound in the coming month exists, but market volatility remains always present. Paying attention to the technical thresholds of 97 and 100.26 will be key to determining whether this trend can sustain or not.