The US dollar completes its first "golden cross" in over two years, continuing to rise and potentially bringing more trouble to the stock market.

The US dollar has completed its first "golden cross" since July 2021, which may indicate that the dollar is about to rise, bringing more problems to the stock market.

According to the Dolphin Research APP, as of Friday, the 50-day moving average of the ICE US Dollar Index (DXY) was 103.15, higher than the 200-day moving average of 103.11. The index closed at 105.56 on Friday, reaching its highest level since the bankruptcy of Silicon Valley Bank on March 10, 2023.

The ICE US Dollar Index (DXY) rose 0.2% this week, marking its 10th consecutive week of gains, the longest record since the 12-week consecutive gains that ended in October 2014.

When the 50-day moving average crosses above the 200-day moving average, a "golden cross" occurs. This is a signal frequently used by technical analysts, which usually (but not always) indicates that momentum in a certain direction is strengthening.

In contrast, a "death cross" occurs when the 50-day moving average falls below the 200-day moving average. The US dollar experienced a "death cross" on January 10, which was followed by a downward trend for the next six months, reaching its lowest point of the year on July 14, 2023. Since then, the US dollar has maintained an upward trend, and some currency strategists believe that given the Federal Reserve's strengthened forecast of maintaining interest rates above 5% before 2024, there is reason for the US dollar to continue to rise.

According to analysis by Dow Jones Market Data, the US dollar usually continues to rise in the three months after a golden cross, with an average increase of 1.9%, and 79.2% of the time the trading price is higher. The performance one year later is more mixed, with the US dollar rising 58.3% of the time, with an average increase of 1.5%.

If the previous golden crosses serve as a guide, the recent rise in the US dollar may only be the beginning of a larger upward trend. According to data from FactSet, after the last golden cross on July 29, 2021, the US dollar index rose by about 25%, from around 91 to nearly 115 by the end of September 2022, reaching the highest level in twenty years.

Some analysts warn that the rise in the US dollar, along with the increase in US bond yields, may bring more problems to the stock market. According to market data from Dow Jones, the S&P 500 index fell more than 1.6% on Thursday, marking the largest single-day decline since March 22.

Jeffrey deGraaf, a technical strategist at Renaissance Macro Research, wrote in a report to clients, "The new highs in yields and the golden cross of the US dollar have brought strong headwinds to the market."