Back in March, when currencies were gyrating wildly, DXY shot nearly 10% higher in a little over a week [see: Currencies to the Rescue] to rescue stocks – which sorely needed a rescue at the time. But, it became very overbought. Our downside target of 94.20 remained in place.

In July, when DXY reached the target and plunged through the channel bottom there, we started looking at 91.358 as the next most important level of support.

The 91.358 target was even more important tha 94.20 for a number of reasons. Now that we’ve reached it, what can we expect for the dollar and other major currencies?And, what does it mean for bonds, gold and equities?

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ES is up 13.7% since the last bearish (bullish for stocks) cross in VIX’s 10- and 20-day moving averages on Nov 11. Since its recent highs, VIX has dropped from 41.16 to Friday’s lows of 19.51 – a plunge of 52.6%. Just as importantly, it broke below several trend lines of support along the way, with each breakdown triggering algos to push stocks to new highs.

As we’ve discussed many times over the past few months, 19.86 is a key price level for VIX – the 88.6% Fibonacci retracement of its rise from 11.42 on Nov 26, 2019 to 85.47 on Mar 18, 2020.After testing 19.86 in Friday’s pre-market, VIX bounced up to backtest its hapless 10-DMA – where it was unceremoniously slammed 12.6% lower – thus ramping ES 72 points higher.

This is a game VIX plays very, very well. Sitting just above this key level of support, it is once again firmly in control. It’s VIX’s party now.

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