Global currency war has benefited the buck

Dollar Index Futures for March 13, 2013

In the last 6 weeks the US dollar has been on a tear gaining 4.8% lifting prices to 6 month highs and above the 61.8% Fibonacci level. Looking at the chart above the last time we experienced such a one sided trade was just before futures peaked in June 2012. Past performance is not indicative of future results. I am not calling a top but I do not expect this pace to continue and a move is not sustainable in any market including this one unless we get ebb and flow. That being said we should get some relief via some sort of correction in the near future…that is my opinion.
Of late the greenback has served as the nicest house in the worst neighborhood as the global currency war has benefited the buck. In the FX space in the last 5 months as the dollar has retained its footing the Yen is lower by nearly 20%, the Cable off by 9% in the last 3 months and in the last 6 weeks the Euro has shed 5.5%. The only major currency that I track that has experienced positive performance vs. the dollar is the Mexican peso; currently trading at a 17 month highs. The peso has appreciated 18% off its lows from June 2012. All of you planning your Spring break in Cancun will be paying a premium for you tacos and cervezas.
Why movement in the dollar is critical in the commodity space is a number of commodities are priced in dollars and we would likely see an inverse move in metals and energies if we were to see prices start to retrace back towards the 20 day MA; identified by the dark blue line in the chart above approximately 2.8% below current levels. I am mildly bearish thinking we get back to the 20 day MA and I’ll remain in that camp as long as futures remain below the red line on the chart above. That key pivot point comes in at approximately 83.70; a level that served as resistance in 2010 and more recently in 2012.
To discuss in more detail this chart or any other you can reach me at: mbradbard@rcmam.com or 954-929-9997
Risk Disclaimer: The opinions contained herein are for general information only and are not intended to provide specific investment advice or recommendations and are not tailored to any specific’s investor’s needs or investment goals. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results.