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

Open FX Trades 

  • USD/CHF
  • NZD/USD

FX Trades On Our Radar:

  • USD/MXN
  • USD/CNH

January 6th Market Re-Cap

Additional Reading/Listening:

  • 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.

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