Wednesday, February 4, 2015

Has the US Dollar Topped Out?

I'll be exploring the US Dollar in a column for this week (or on the weekend, whenever they run it). Here's a preview.

This is a chart of the PowerShares DB US Dollar Index Bullish Fund – an ETF that tracks the US dollar closely. You can see it’s in a big uptrend. Heck, a runaway uptrend.
I circled where the UUP/US dollar gapped higher on January 23rd.  Two days later, it gapped down. This price level hasn’t been touched since. That is called an “island reversal.” It is indicative of a short-term top in the U.S. dollar.
If the dollar tests support from its recent uptrend, that’s about 2% lower.  Long-term support is about 4.5% away. Will it get there?
On the bottom of the chart, you’ll see a chart comparing funds that track the US dollar and crude oil. You can see that they move opposite each other. This is because crude is priced in dollars.
So if you’re looking for a reason for crude oil’s recent rally, I’d say one BIG reason is the pullback in the dollar.

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