If you go back in time and read comments from 2-3 weeks ago I had called for deprecation in the dollar and the market delivered. I only bring this up because the move happened a lot quicker than I anticipated…from the high made 5/23 June futures are lower by 3.3% in just over 2 weeks. That being said I expect a “dead cat bounce” from here. The 61.8% Fibonacci levels (lower white jagged line) appears to be the line in the sand as prices are bouncing from oversold levels…see stochastics on the daily chart below.
As always when I do analysis on the greenback it is not because I am establishing a bullish or bearish play for my clients in the dollar but rather it will dictate how I trade other instruments depending on their relationship to the dollar. Markets that I think could have a direct inverse relationship if this plays out are the Swiss franc, Euro, Cable, Cocoa, Crude oil and metals complex. Those long European crosses should tighten up stops. I like probing bearish plays in cocoa and Crude oil. As for the metals gold and silver continue to tread water but on a 1.5-2% advance in the dollar we may get a washout in metals dragging silver under $20/ounce and gold closer to $1300 in my opinion.
Perhaps an argument can be made technically when looking at the daily chart above that we resume a move higher but please take a look at a weekly chart and convince me that the depreciation in the last three weeks may not be the beginning of a larger move that drags the dollar back under 78.00…levels not seen in fifteen months. On the docket domestically in the coming week is CPI, PPI, and a FOMC meeting…stay tuned.
As always, I’m here to discuss specifics and give guidance. Shoot me an email…Give me a call… To discuss in more detail this chart or any other you can reach me at: email@example.com or 954-929-9997