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Currency Market: US Dollar Index has Entered a Consolidation Phase


Commodities: Coffee looks poised for a huge bull market, and this pullback is an opportunity.

The US Dollar Index (DXY) has entered a consolidation phase after a nice trend higher, and that should be healthy for the trend to pause while also potentially creating another good risk reward entry on this pullback. I would keep an eye on the 84 level as the spot to start increasing long exposure to the US Dollar Index again, as I think that should hold well and offer a chance to pyramid long positions.

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The Brazilian Real should be an interesting currency to watch over the next week as elections are coming up on Sunday. I am not a fan of trading ahead of binary events, but I did notice the longer term Real chart could be setting up for a huge double bottom with the 2008 (and last year) lows. This could be one to just buy volatility through options as one way or the other, this currency is going to have a huge move from current levels. We'll know early next week which way the Brazilian Real will run!

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As I mentioned several times over the last year, I think the setup in Coffee is extremely compelling at current levels, and this pullback to $2 is a huge gift in my opinion. A pop in the Brazilian Real next week could quickly reverse this downtrend, and coffee is having a "Turnaround Tuesday" right at critical support levels. This is a weather dominated market right now so it will be very volatile, but Coffee remains my best idea trade into year end, as I think we could see it go up more than 50% from current levels. Volatility should increase significantly here as well so another good market to play with options. Good luck out there!

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Positions in BR & KC futures, KC Options and CAFÉ & JO equity.
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