The US dollar is minting 8-month highs after appreciating 5.4% in the last 60 days. Sunday night’s selloff tested the 38.2% Fibonacci level, where prices quickly bounced. June futures are now at 83.50 and will likely close the week above their 20-day MA (dark blue line).
83.50 remains the line in the sand – from current levels, I say tails from here. I see limited upside and will be scaling into bullish trades in select commodities and FX crosses on anticipation of a lower dollar in the weeks ahead.
I remain friendly to all FX crosses other than the Kiwi and Aussie, both of which look heavy to me at current levels. As for commodities, I see the metals and agriculture complexes being most influenced by a weaker dollar. Gold and silver have treaded water for weeks now but I think capital will find its way into these two metals in the very near future. As for the Ags… wind was taken from bulls’ sails today on a bearish USDA report. But I actually see this presenting a buying opportunity. I’ve advised clients to be buyers of new crop corn and wheat from lower levels and, perhaps a little off the beaten path, I like longs in soybean meal as well. The meal curve is still inverted, meaning investors can buy forward contracts at a discount to the front month.
Even though the US dollar and Copper are two contracts I rarely trade, I always follow them as they help me navigate entries and exits in related markets. I’ll use Fibonacci levels on the greenback to consider profit targets in long commodity trades. A settlement below the 34-EMA (orange line) would be the first significant bearish development in my eyes. Ultimately I think it’s possible to see a trade back to the 50-day SMA (light blue line) in the coming weeks.
As always, I’m here to discuss specifics and give guidance. Give me a call…
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