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Currency Market: US Dollar Index Breaks Out to New Highs, Confirming Upward Trend


The US dollar bull market appears to be just getting started.

MINYANVILLE ORIGINAL The US Dollar Index has confirmed the bull market trend higher by breaking out to new 52-week highs, and I continue to think this could just be the start of a huge move higher. With the January highs around the 82 level out of the way, that level should now act as support on any ensuing pullbacks. This move confirms the inverse head-and-shoulders pattern that meets my intermediate projection of 90 on the US Dollar Index. This also gives some weight to the double-bottom pattern confirmed around 75, which could provide a target of 105 once the '08-'09 crisis highs are taken out around 90. See the setup below.

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The continuing euro death spiral has obviously been the major tailwind for the US dollar rally, and I have been looking for other ways to get euro short exposure against some currencies that might not have moved as much yet. One currency cross that I thought looked interesting is the EURNOK pair. This gets you short the euro and long the Norwegian krone, which is typically viewed as a relatively strong Scandinavian currency. It looks like this cross could really plummet if it breaks the 7.50 level.

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Another interesting currency cross that I think looks compelling here is the USDHKD. This gives you long US dollar exposure while short the Hong Kong dollar. I think this trade could start working if China really is slowing, and I like anything that gives you US dollar long exposure. As you can see in the below chart, this cross has been supported historically around the 7.75 level, and now that it is turning up at the 50-day moving average just below the 7.77 level, it looks to me like a good risk-reward bet on the long side. Good luck out there. Hopefully, you have been enjoying this US dollar rally, and if not, start buying pullbacks!

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