I want to revisit the topic of the US dollar as I do feel an interim bottom was established in recent weeks and it appears we will see a rebound in the immediate future. I’ve been calling for this for several weeks but we only got confirmation this week with a close above the 20 day MA (light blue line) and then penetration of the 34 day EMA. The next upside resistance is seen at the 50 day MA (blue line) overhead. As of this post September futures are 1.7% above the lows made 8/20 and while I do not think we trade to the July highs near 84.75 I do think it possible we get an additional 1.5-2.5% appreciation lifting futures above the 61.8% Fibonacci level.
When I write about the dollar it generally is not to position in bearish/bullish trade in the greenback but rather to guide traders on entry and exit in other commodities that have a relationship with the dollar.
Let’s explore a few ideas…
Dollar Index Futures chart, August 30, 2013
In recent posts I’ve advised bearish exposure in silver (8/28) and the yesterday (8/29) bearish trades in gold. As of this post gold is $40 off recent highs and trading under $1400/ounce. Silver has backed off just more than $1.50 trading at its lowest price on the week. I am looking for more downside in both metals.
Trading Crude oil can be intimidating especially when there is turmoil in the Middle East. However prices are nearly $5/barrel off their recent highs and probing the 8 day MA as of this post. If we avoid a military conflict I think futures quickly find their way back to their 50 day MA…currently at $103.60.
I’ve been advising bearish exposure in the Euro, Swiss Franc and Pound. With all three crosses below their 20 day MAs I expect the path of least resistance to be down.
The same flight to quality/safety play that is likely contributing to the current appreciation in the US dollar should aid in the Treasury complex catching a bid. My stance is that at least for the next few weeks leading into the FOMC meeting we see a higher trade in 30-yr bonds and 10-yr notes.
These are just a few of the markets that I feel will look for guidance from the US dollar. To drill down on more specifics reach out to me.
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As always, I’m here to discuss specifics and give guidance. Shoot me an email…Give me a call… you can reach me at: mbradbard@rcmam.com or 954-929-9997
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