Since 1970, for the 39th time, the US dollar has shown a "golden cross" — and this is an extremely rare occurrence.

The US Dollar Index has recently triggered a key technical buy signal, and US stocks and crude oil may also see an upward window.

According to Chase Wind Trading Desk, the latest analysis from Bank of America Merrill Lynch's technical strategy team shows that the US Dollar Index (DXY) saw its 39th golden cross signal on December 19—a technical indicator that historically tends to signal dollar strength. Historical data shows that after the golden cross, the probability of the dollar index rising within 20-60 trading days is 68-79%, with an average gain of about 1.22%.

More notably, this golden cross is a very rare type—this is the 16th time since 1970 that a golden cross has occurred while the 200-day moving average is trending downward. In this special situation, historical data shows the probability of the dollar rising is as high as 80%.

This signal is also significant for other asset classes. The S&P 500 Index has shown mixed performance in the early stages after the golden cross, but typically turns stronger after 35 trading days. Crude oil has a 100% probability of rising within 35 trading days after the signal appears. The trends for gold and 10-year US Treasury yields are relatively neutral, with an upward probability of about 50%.

39th Golden Cross: Follow-up Upward Probability as High as 79%

On December 19, the US Dollar Index closed at 98.60, and its 50-day moving average crossed above its 200-day moving average, forming a “golden cross” signal in technical analysis.

Historical statistics show that after a golden cross appears, the dollar index shows a marked upward trend. Since 1970, this signal has appeared 38 times, and the current event is the 39th. Bank of America Merrill Lynch's report shows:

After a “golden cross” signal appears, within the 20-60 trading day window, the effectiveness of the signal is most significant, with the probability of a dollar increase reaching 68-79%. Specifically, the probability of a rise is highest at 35-40 trading days and at 60 trading days, reaching 79%. In terms of average gains, within 20-60 trading days, the gain is about 1.22%, with a median increase of about 1.40%.

This shows that although the market usually experiences seasonal weakness at year-end, the dollar has a clear technical advantage for upward movement in the first few months of next year.

Extremely Rare Situation: Golden Cross During a Downward Trend of Moving Averages

More attention should be paid when the golden cross signal appears with the 200-day moving average trending down (this is the 16th time), as the dollar performs even more strongly in such cases. In these special situations, the probability of the dollar rising after 15, 25, 35, and 60 trading days is as high as 80%, that is, 12 out of 15 times the dollar rose.

The special aspect of this golden cross is that both the 50-day and 200-day moving averages are trending downward, which is extremely rare, with the previous occurrence in 2004. At that time, the US Dollar Index experienced about six months of sideways movement, followed by a decline in the fourth quarter during the Federal Reserve's interest rate hike cycle.

The 2004 experience suggests that a golden cross signal under a background of dual declining moving averages may lead to increased market volatility. That year, after the golden cross appeared on June 8, a death cross appeared again on July 27, followed by more alternating golden and death crosses—showing pronounced oscillation.

Bank of America Merrill Lynch's technical analysis shows the US Dollar Index is currently testing long-term trend line support around 97. If this support level is breached, the dollar could further fall to the 90/87 area.

Crude Oil’s “Perfect Record” and Lagged Rebound of US Stocks

The golden cross signal not only influences the dollar itself but also has important effects on other asset classes:

The S&P 500 index shows neutral performance within 30 trading days after the signal, but starts showing an upward trend after 35 trading days. When the US Dollar Index’s 200-day moving average is trending downward, the S&P 500 performs even more strongly, with an 87% probability of rising in 60-80 trading days.

The crude oil market reacts most positively to this signal. Historical data show that crude oil tends to rise within 40-70 trading days after the golden cross, with a success rate of about 70%. When the US Dollar Index’s 200-day moving average is trending downward, crude oil’s performance is even more outstanding—the probability of a rise after 35 trading days reaches 100% (all 12 instances saw increases), with average gains of up to 9.07%, and a median gain of 10.82%.

In contrast, gold and 10-year US Treasury yields react relatively neutrally to the dollar’s golden cross signal, with an upward probability hovering around 50%, without a clear trend preference. This suggests that traditional safe-haven assets may face differentiation as the dollar strengthens technically.

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The above exciting content comes from Chase Wind Trading Desk.

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