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Currency Market: US Dollar Index Is Testing the 80 Resistance Level, and Should Be Sold


Plus, setups for Canadian and New Zealand dollars.

MINYANVILLE ORIGINAL The US Dollar Index is catching a bid this morning with the risk-off tape, and it is popping above the 80 resistance level. There is pretty heavy resistance above 80 as the DX is now seeing a "Death Cross" with the 50-day moving average crossing below the 200-day moving average. This should provide significant resistance on any rally above 80.5, so it looks like the US Dollar Index is setting up as a nice risk/reward short at current levels. I think you are risking 81 on the upside, for a potential downside move back into the mid 70s. I'll take 5 to 1 reward to risk any day.

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The recent weakness in commodities, especially the metals and crude, might be providing a good opportunity to buy commodity currencies against the US dollar. The Canadian dollar looks to be at a good support level, and there were some hawkish comments out of the country this morning that could start to support the CADUSD cross at current levels. As you can see in the below chart, the 200-day moving average will now provide support to CAD right at parity, so this should be a good spot to buy CADUSD with an attractive risk/reward profile.

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The New Zealand dollar (NZD) has a similar setup, and actually looks a little bit better than the CAD on a relative basis. The 200-day moving average should provide support on any move below 81 on the NZDUSD cross, and should be used as a backstop to trade long positions. The commodity currencies should outperform if and when the US Dollar Index rolls over above 80. NZDUSD has an attractive risk/reward setup as you can see below, and could be paired with an Australian dollar short, which looks relatively weaker than the other commodity currencies. Good luck out there, tough markets!

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