Trend Change in The Dollar Index?

FX Land Heating Up

March 4, 2017

OK traders….did yesterday’s price action offer the first definitive clue that a move lower in DXC is underway and thus a move higher in EUR/USD?

While yesterday’s push lower stalled right at the Wave Count Invalidation Level (W.C. Invalid on the chart below) at 101.28 (funny how that happens) the decisiveness of the move suggests that 101.28 might fail come Sunday/Monday.

Perhaps the trend is on the verge of changing?

Additionally, I had also noted in Friday’s update that a move/close above 1.0586 in EUR/USD was a sign that the bulls were coming out of hibernation. Time will tell but it certainly looks like next week will offer up some potentially great trades.

As you know, for the last 2 weeks, I had issued 3 NEW TRADE ALERTS in EUR/USD alone looking for a sustained break higher. All 3 were winners, but the timing was not right for big gains. Friday’s action puts me on alert again.

Look simply at the relative performance of EUR/USD. Normally these 2 move neck and neck together (inversely) but since Wednesday EUR/USD has out-performed DXC by .50%. All other things being equal it seems like EUR//USD is poised for continued out-performance.

Mind The Gap

Much has been said about the S&P’s….and frankly it is such a well worn topic that trying to offer anything more at this juncture offers little value.

  • The trend higher remains firmly intact
  • Volatility and intra-day price ranges are simply awful – oddly enough historically that has allowed for further gains.
  • The economy chugs along
  • Valuations remain very stretched

While arguments can be made for lower levels, there lacks a catalyst. Nonetheless, being a cautious/tactical bulls makes sense.

On Thursday however, some new data did emerge that is worth noting. Thursday’s 1.37% gain broke a 55-day streak without a 1% move. The move could be seen as a runaway gap, and if so, suggests even higher levels (2500?).

We remain a bit light in terms of exposure to equities and that will need to be addressed.

  • Long TXN March Call Spread
  • Long NGD
  • Closed a long in PDP earlier in the week for +1.24%
  • Closed a Short SPY Put Spread for +64%
  • Closed a long in EEM for +1.3%

It looks like I will need to get some more exposure based on this week’s developments.

Traders Descend on The Ranch

Lastly, registration is now open for this year’s Trader’s Round Table at The Ranch.

You will not want to miss this event as I have lined up some of the industry’s best traders/analysts to come and talk trading….with you.

Schedule of Events May 4-6, 2017

Early bird pricing/registration ends on March 17th – Click the link below for all the details.

Trader’s Round Table at The Ranch

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