The US Dollar Index failed right where it should over the past week, and validated the 200-day moving average and 81 level as significant resistance. As I mentioned last week,
I liked adding short exposure to the DX above 80, and I would continue to sell this market. The next key level in my view is 79, and a close below there would be very bearish for the DX, as it would open the door to further US dollar weakness back into the mid 70s. We’ll use the 75-77 range as a target if we do see a DX close below 79.
You can see the bearish action in the US Dollar Index below.
Click to enlarge
It looks like any plays that benefit from a weak US dollar should continue to act well as we start off 2013, and I would also point out the nice bull flag in gold. It looks like if gold can get above the 1700 level, then it will be a straight shot to 2000 or higher. I would look to add exposure on pullbacks.
Good luck out there!
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