Dollar Bulls Maintain The Edge
FX Recap: Week of January 13, 2019
Contrary to the way I came into 2019, Dollar Bulls Maintain The Edge. My initial outlook was that the Dollar Index (DXY) would begin to decline and trade towards 92.50-91.50. That outlook is being put to the test. Last week’s successful ‘hold’ of the 61.8% retracement at 95.29 suggests prices are to continue higher.
- For the above scenario, the minimum upside attraction seen towards 97.84-98.19 – we peg that at a 53% chance within one week.
- The move lower in gold is also keeping a bid on DXY and should put some downside pressure on AUD/USD.
As you can tell, I am not trying to make a long-range forecast here…simply looking ahead several days/weeks. Given how the market is trading, shorter-term forecasts may be the best strategy.
Closed FX Trades:
- Short EUR/NOK +540 pips
- Short CAD/JPY +23 pips
FX Trades On Our Radar:
- Emerging Markets (EEM) continue to get considerable press. Nearly everyone is calling for a turn higher as valuations are attractive and turnover is at a record high (see chart below). Previous high levels of turnover have been bullish. However, one needs to weigh that against a stronger US dollar. A strong US dollar is typically a headwind for emerging markets.
- I am seeing far too many overly pessimistic data points recently. And the vast majority of the ones I am seeing are contrarian. The one below is a perfect example. Don’t get too bearish in here….it might hurt! Just as a refresher, March 2009 was the start of a pretty big move higher in the S&P’s.
- It might be time to short copper (CPER)
Have a question for me? Just ask.