As I have mentioned in my bio, I have been trading currencies for quite a while. I do not miss getting up at 1am EST to get ready to trade the London session. Yet, these days with the current violent moves in currencies I find it hard not to sacrifice an hour or so of sleep to put a day-swing trade in the EUR/USD pair.
During the past 2 weeks we have seen a considerable move in the dollar against the major European currencies. The violent move across the board appears to indicate that the fundamentals are changing for the Dollar. From a technical perspective the 2 year downtrend in the dollar index futures has been breached (see the chart below).
Obviously the important question is whether this move is sustainable. I do not really have an answer for that one, I welcome comments. But as trader the recent strength in the dollar has created a great fade opportunity in the EUR/USD. The pair is approaching a long-term uptrend line and considering the ridiculous move, (1.56 to 1.47 in 2 weeks) I find it hard to believe that we will crack that line the first time around. So I’m looking to load up around the 1.4630-1.4650 area and looking to hit if we go through 1.46. If the dollar index holds the 77.90 area then I’m going to really load the boat.
So how does this help me with my equities play this week? Well, if the volatility is maintained at these high levels in the currency markets I expect a bit of action in the Gold and Oil sectors. Perhaps a weaker dollar move will lead to a bounce in oil and thus the beaten down oil services stocks. Regardless of how my dollar play ends up, it should be a good trading week considering that it is summer time. Get ready for some free money!
4 Comments on “Is the Dollar Strenght Sustainable?”
The people I’ve talked to believe that the dollar is now the funding currency in the carry trade, leading to this sort of demand. My bet is that since it has ran into supply from 9 months ago, it will retrace to the breaking point, and then resume a further downward move.
The people I’ve talked to believe that the dollar is now the funding currency in the carry trade, leading to this sort of demand. My bet is that since it has ran into supply from 9 months ago, it will retrace to the breaking point, and then resume a further downward move.
unluckily theres no easy way to know where the black boxes of cta’s will stop triggering aggressive buying orders in the buck; but the attentive eye of the good discretionary trader will spot the nuances of the rising imbalance of aggressive selling pressure (if any) and will act accordingly. btw, i’ve got a feeling ag’s are acting as a good leading indicator in the last few days for moves in the $.
unluckily theres no easy way to know where the black boxes of cta’s will stop triggering aggressive buying orders in the buck; but the attentive eye of the good discretionary trader will spot the nuances of the rising imbalance of aggressive selling pressure (if any) and will act accordingly. btw, i’ve got a feeling ag’s are acting as a good leading indicator in the last few days for moves in the $.