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Currency Market: US Dollar Index Has Turned Higher at Support, Confirming Bull Trend


The euro is back below 1.25 and commodity currencies have turned lower at resistance.

MINYANVILLE ORIGINAL The US Dollar Index has turned back up nicely from just below the 82 support level cited last week. This confirmation of prior resistance now becoming support shows this bullish trend is clearly intact. There is definitely potential that we could see another pullback below 82, but I think that would simply be another great buying opportunity since it doesn't look like this market should trade below 81 to me. I would continue to add to US Dollar Index long positions on any pullbacks, as the risk reward in this bull market is heavily skewed to the upside. Notice how the MACD is close to turning positive again as well.

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The euro has clearly supported the US Dollar Index rally, as it has remained under pressure breaking back below 1.25, and the commodity currencies all seem to have rolled over at resistance. I highlight the commodity currencies because I think they have slightly better short side entry points against the US dollar than the euro at current levels, and not to mention probably less headline risk at the moment as well! For example, I really like the current setup for a short position in the New Zealand dollar. As you can see in the below chart, the NZDUSD cross has rallied from 0.75 support right into the 200 day moving average just below 0.80, which should provide a nice backstop to fresh short positions.

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The Hungarian forint has a similar setup and is another one of my favorite short setups currently. The USDHUF cross has pulled back right into the 200 day moving average, and notice how it is starting to turn back up (bullish USD, bearish HUF) with the MACD about to give another buy signal. Again, you have a clear backstop against the 200 day with clearly defined risk. I think this cross could explode back towards 250 when this US dollar rally kicks into higher gear. With minimal downside, and serious upside potential, this is the kind of favorable risk reward trade I would take any day! Good luck out there!

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Positions: EUO, GBP futures, GBPUSD, NZDUSD, USDHUF
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