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Currency Market: US Dollar Index Pulling Back After Making New Highs, Trend Still Up


The euro might get an oversold bounce here, but the US Dollar Index rally should continue.

MINYANVILLE ORIGINAL The US Dollar Index is pulling back slightly after breaking out to new highs last week. The euro seems to have stabilized near term, and there is currently a counter trend Tom DeMark buy signal in the euro, which will probably mean that we get another bear market rally. If this causes further weakness in the US Dollar Index, I would view it as a buying opportunity, especially if the DX gets back below 82. I would be an aggressive buyer on a pullback to that level as the bull market in the US Dollar Index is still intact.

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The commodity currencies have been relatively outperforming the US dollar recently. As I mentioned last week, I have been wrong about them near term. However, I still think the Canadian dollar looks like an interesting short opportunity at current levels. Ultimately, I think the bull market in the US dollar will prevail, and the Canadian dollar has very heavy resistance from 0.99 to par. Notice how the CADUSD cross has rallied right to the underside of the 200 -ay moving average, and the MACD indicator looks like it is about to give another sell signal. See the short setup below.

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The Swedish Krona also looks like an interesting short at current levels against the US dollar. Obviously, this is kind of a tertiary short Europe play, but the risk reward setup in the USDSEK cross offers a much more favorable play. As you can see in the below chart, the cross has pulled back to the 7 level, which I think it a great spot to buy the US dollar against the Swedish Krona. Good luck!

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Positions in EUO, USDCAD, USDSEK
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