Anyway, UUP is a pretty good analogy for the US dollar. And recently, the US dollar looked like it was breaking down. But the past two days have seen an astounding recovery in the Greenback. It is now back above its 200-day moving average, as well as testing the upper boundary of its down-channel.
(Updated chart)
The dollar got a big lift yesterday as traders hoped that the European Central Bank would embark on a new round of stimulus (easy money in Europe, which would potentially weaken the euro). Today, it got another boost as China's central bank cut its interest rate for the sixth time since November and urged its banks to lend more.
There were also many bears betting against the dollar. That boosted the dollar with a short-covering rally.
So is the dollar heading higher from here? I want to bring up two things ...
The Fed is not going to raise interest rates this year. It missed its opportunity in October, and recent data has actually been weaker.
A debt-ceiling fight is looming in Washington, D.C. This has the potential to drag on the U.S. economy and even impinge the credit rating of America.
We'll wait and see. One interesting point: Gold is really showing strength in the face of this dollar rally. That's very unusual.
Good luck and good trades.
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