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US Dollar Index Continues to Frustrate Trend Traders

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The US dollar got hit on the Summers news, and it remains just above critical support.

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The US Dollar Index could not be much more frustrating to me than it has been over the past quarter; every time it looks like a trend is turning higher, it fails to confirm and creates another whipsaw. If a high level of frustration is any indication that a trend should emerge soon, then we are overdue in the US dollar! This sharp pullback into the 81 level needs to hold for the DX to have a chance to rally into quarter-end. I am going to stick with a bullish position for now, although tight stops are needed if the 81 level breaks.


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The euro bounced right off of the 200-day moving average, and it has rallied back up to the underside of the 1.34 level, which is basically a six-month high. The euro failed at this level in June and August, so there is a good bit of resistance overhead, although the higher low earlier this month keeps the euro in a bullish position. It seems like this market is winding up right into quarter-end, so hopefully we will get some resolution soon and see it break out one way or another.


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We should continue to watch the Japanese yen closely, as it too has been trading around a key level; it could be poised to weaken further if the USD is able to push above the 100 level. The short yen trade seems to be pretty crowded, however, so I would be careful with this one as we head into quarter-end. A rally in the yen would catch a lot of shorts offside, and that could be an early warning signal for risk.


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Positions in DX futures and options.
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