U.S. Dollar – Breakdown or Bear Trap?

  • SumoMe

The U.S. Dollar (USD) is getting a lot of attention these days, and not in a good way.  If you look at the chart in Figure 1, it would appear that the answer to the question posed in the headline is pretty obvious.11Figure 1 – US is clearly breaking down…… (Courtesy ProfitSource by HUBB)

(See also Time to Adjust FXE and USO Positions?)

One can look at Figure 1 and pretty easily conclude “Breakdown”.  And they may be right.  But sometimes a little perspective can offer a view in a different light.

Figure 2 is a longer-term chart and seems to suggest that USD is heading smack  dab into what has historically been “the scrum zone” (for lack of a better term) for the dollar.

12Figure 2 – …..or is it? (Courtesy ProfitSource by HUBB)

As you can see the USD has a long history of bouncing around at or near its current level.  What happens from here?  Let’s add one more interesting (OK, “interesting” might be a little strong, but hey I’m a market geek) item.  The charts in Figure 3 were posted on Twitter by renowned trader Peter Brandt and displays sentiment among two different groups of traders.  If you look closely you will note that both readings are at extreme levels that historically have been followed by reversals in the dollar.USD sentimentFigure 3 – US Dollar sentiment as a contrary indicator (pointing to a reversal?) (Courtesy: Peter Brandt)

(See also Time to Adjust FXE and USO Positions?)


So which way the dollar?  Have to go with my standard response – “It beats me.”  But the key things to note are:

1) Don’t necessarily buy the idea that the “dollar is dead”

2) Recognize that whatever happens in the USD wil have a big impact on currencies, metals and energies, particularly crude oil.

Jay Kaeppel

Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.