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US Dollar Index Rallying Back Into Resistance -- Time to Add Shorts!


The Japanese yen still looks compelling, but the Swiss franc has started to break down.

The US Dollar Index has rallied back above the 80 resistance level, and I'd look to establish short positions here with a tight stop. The 200-day moving average lies above around 80.55, so that should provide a good backstop to short against. It still looks like the US dollar could roll over back into the mid-70s, so the risk-reward on short positions at current levels makes sense to me (see the chart below).

Click to enlarge

The Japanese yen continues to percolate just below the 200-day moving average, and I think this consolidation phase is building up some power to break through and rally into quarter end. The US dollar failing at the 80 resistance level would obviously help give a bid to the yen, and I think long yen positions provide an attractive hedge if we enter another risk-off environment later this month.

Click to enlarge

The Swiss franc was acting well until recently, and it has started to violate support levels. It needs to find support right here, otherwise caution should be warranted, and a close below 1.125 would have me moving to the sidelines on the Swiss franc. It will be interesting to see if this 80 resistance level on the US Dollar Index creates turning points in the other currency markets. These are key levels for the currency markets, so pay close attention and manage risk accordingly. Good luck out there!

Click to enlarge
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Position in DX, MJY, and MSF futures.
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