The Greenback is looking increasingly weak. I tell you this not as a recommendation to get short the dollar, but as a cue to look for bullish exposure in inversely correlated markets.
Looking at a weekly chart, 84.00 is clearly the line in the sand. This level once acted as support (in 2010), and has since proven to be strong resistance – in early 2011 and then again last July. Dollar bulls’ latest attempt didn’t even make it to 84.00 failing to close above 83.50 for eight straight weeks of top-forming action.
This recent move higher seems to be done. After appreciating 5.8% off the February 1st lows, dollar sellers have capped the advance well under 84.00 and futures have been in the red for five straight days now, losing better than 5%. Prices are breaking below all major short-term moving averages, including the 20-day SMA (dark blue), the 50-day SMA (light blue) and the 34-day EMA (orange).
US Dollar Index Futures chart, April 30, 2013
With multiple central bank meetings on the docket this week, and our monthly NFP number out Friday, expect fireworks. And even though I expect the dollar to trade lower, it may be a bumpy ride.
Although there is not as much talk of the “carry trade” these days, as spreads have narrowed, you should still consider whether or not the dollar will continue to serve as the flight-to-safety safe haven that is has in the past… I think not so much.
As always, I’m here to discuss specifics and give guidance. Give me a call…
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.
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