Saturday, November 03, 2012

Outlook For The U.S. Dollar


I know I haven't been posting as often as I did in the past and I do appreciate those of you who have stayed with me for all these years.. Now lets get right to the charts!

Above is a 5 year weekly chart of the U.S Dollar and in the lower panel is the net positions of the 3 major players in the market. I'd like to focus just on the red line which represents the net position of the commercials. As you can see the red line is now positive which indicates a net long potion by the commercials. You'll notice back in 2008, late 2009 and in 2011 that the net position of the commercials was positive just prior to huge rallies in the dollar. Now just because the commercials are bullish does not mean we should run out and start buying dollars. We need a trigger to suggest that the bottom is in and that is what I'd like to show in the next chart.



Above is a daily chart of UUP which is an ETF for the U.S. Dollar. In my opinion it appears that the dollar has put in a significant bottom. We see a clear break of the downtrend line as well as a 1-2-3 bottom formation. When you combine this with the net long position of the commercials,  my view has to be for much higher prices.

The Euro (FXE) has a similar setup but to the downside. I'm looking for the foreign currencies (FXE, FXF and FXB)  to move lower. A rising dollar should also put pressure on gold and silver as well as oil. As always lets see what happens!

4 comments:

Anonymous said...

You are certainly correct the next trading day so far. I was personally waiting for a higher low on dollar, but it didn't happen. I'm thinking dollar could get smacked down when Obama wins (I'm pretty sure of that and bidding that on prediction markets). That would be a good long entry point on dollar and short on equities.
Thanks for blogging again!
Jacek

Jeff said...

Kevin,

I always enjoy reading your market comments and find them helpful. Thanks for this post on the US dollar. Do you think you'll be posting more often?

Technical Analysis said...

Usually, US dollar (DX) goes up when stock market(S&P 500) declines. yet, current decline on the S&P 500 is quite "lazy"

Kevin said...

Hi guys... Every now and then I'll post my thoughts. Thanks for reading, I appreciate the nice comments.

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