Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Time to Give Up the Bullish Case on the US Dollar


The US dollar was crushed by the Fed last week, and just can't get going on the upside.

As I mentioned last week, the US Dollar Index continues to be very frustrating for trend traders, and I don't think I've had a good call in this market since early in the year. The Fed really put the nail in the coffin last week, and the US Dollar Index smashed through the last support level around 81. The DX has bounced slightly after setting new three-month lows on that event, and I would use this bounce and anything above 81 as an opportunity to sell the US dollar. The risk is skewed back to the downside now, with the door open to the mid 70s on this recent breakdown. Time to give up the bullish case on the USD!

Click to enlarge

The euro blew through the 1.34 level last week on the Fed news, and even pushed above 1.35 for a little bit before settling back down to just below 1.35 currently. The price action must be respected here jsut as much as this euro strength makes zero sense. It does seem like investors are starting to find value opportunities in Europe now, and maybe the US dollar weakness is just increasing the capital flow to what I thought would be a very troubled currency this year. Time to admit I am wrong and move on!

Click to enlarge

The Japanese yen continues to hold in relatively well against the US dollar, and I had been worried that this could be an early warning signal for risk in general. While the initial move after the Fed news has been partially reversed, I think this currency should continue to be watched closely as further strength could really catch a lot of people off-sides in this trade. The long Nikkei (INDEXNIKKEI:NI225) / short yen trade has worked very well this year, to the point it might be one of the more crowded trades at the moment. The market has a way of creating the maximum amount of pain for the most people possible! A big yen rally and carry trade unwind would not be a welcome event for risk into year end.

Be careful out there!

Click to enlarge
< Previous
  • 1
Next >
Positions in MJY, DX futures and options.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos