Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

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


The euro has remained relatively weak, while commodity currencies have rallied against the USD.

MINYANVILLE ORIGINAL The US Dollar Index is pulling back for a second time this month after breaking out to fresh new highs, and it certainly seems like someone wants to fade this rally! I have been wrong when I predicted that commodity currencies would roll over, and help fuel further upside in the US Dollar Index. However, the trend remains higher, and I think the DX is getting back to a point where it is time to get aggressive again on the long side. As you can see in the below chart, the slope of the 50-day moving average is steadily increasing, and it should provide very solid support on any pullbacks below 82.50. I would use this level for the next week to aggressively add to US Dollar Index long positions. The risk reward in this market is still very favorably skewed to the upside.

Click to enlarge

The euro has had a sharp bear market rally over the past few trading sessions, and that is the primary reason for the weakness in the US Dollar Index. It seems like politicians have been saying just about anything to prop this currency up, and I guess we should all be relieved that they will do "whatever it takes" to preserve the euro. I think a few officials said the same thing about the markets just before the 2008 disaster. The chart tells the real story -- and as you can see below, the euro remains locked in a bear market. The trend is still clearly lower, and any rally approaching 1.25 should be aggressively sold. Add to your winners!

Click to enlarge

The British pound is probably my favorite risk reward short at current levels, and I don't mean to offend the Olympics. The "Cable" has been consolidating just below the 200-day moving average for over a month now, and I think this is a great spot to add more short exposure. As you can see in the below chart, the 50-day moving average has crossed below the 200-day moving average, thus forming the infamous "Death Cross," and aggressive shorts positions can be added here with the benefit of a very tight stop just above the 1.58 level. Ultimately, I think the British pound will trade well below 1.50, so you can see the risk reward of a short position is very favorable at current levels. Good luck out there!

Click to enlarge
< Previous
  • 1
Next >
Positions in EUO, USDNOK, USDZAR, GBP futures.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos