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Currency Market: US Dollar Index Has Blown Through the 200-Day Moving Average Support


The US dollar has accelerated lower and precious metals have been a clear beneficiary.

MINYANVILLE ORIGINAL The US Dollar Index has accelerated lower after breaking the 200-day moving average on September 7, and it seems from the recent Fed outlook that the trend lower should continue. Unfortunately, the market is proving my view of a longer term bull market in the US dollar to be incorrect. While this could be another shake-out, we must manage risk; therefore, I would use any bounces in the DX to reduce long US dollar exposure. The upside should remain limited above 80 as the 200-day moving average will now provide heavy resistance on any rallies above that level. Don't fight the Fed!

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The euro has benefitted from the USD weakness, and has now broken through heavy resistance in the 1.25-1.30 range. Of course, this doesn't make a lot of fundamental sense, which is why the markets can be so hard to trade! It looks to me like the 200-day moving average will now provide support for the euro on any pullbacks below the 1.30 level. Longer term, I continue to think that the euro will trade lower, but this is not a time to fight the market, and we must manage risk.

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Positions in EUO.
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