Today’s focus is on the U.S. Dollar Index. I’ve attached two weekly charts that I want you to view
There are a couple of things I want you to take away from today’s report. The first is that I think the double top and suggested upflag are enough to warrant an attempt to sell the dollar. But just as important, the Japanese Yen chart should reinforce the importance of using stops.
You can see how in late 2008 and early 2009 the Yen had a similar formation to the recent action in the dollar. The Yen kept rolling higher and tacked on an additional 30% of relative value. You can also see the dramatic sell off that occurred once the Yen topped in the third quarter of 2011. The Yen rally lasted 4 years. The dollar has been rallying for 4 years. Lee’s weekly trends and reversals model suggests that the dollar has rolled over and is now in a downtrend. The upflag formation would measure to 88.43 if the market adheres to the formation and continues to break down. I don’t pretend to understand or anticipate the competing monetary policies of the world’s governments and their central banks. But I do look for patterns that suggest opportunities for potential trades. The dollar has been parabolic since mid-2014. I would suggest you consider selling the September or December dollar index futures or buying out of the money puts that cost $300-500 in premium. I would manage risk by exiting positions on a weekly spot closing price close over 97.88. You could also consider mitigating risk by using Lee’s Trends and Reversals Model. His model would suggest a resumption of the uptrend if the September dollar closes at or above 97.286 this Friday, June 12th and 100.04 on Friday June 19th. The June contract expires Tuesday, June 16th. I would also suggest adding to short positions if the nearby futures violate this week’s low of 94.86 and again if the market demonstrates further weakness by violating 93.15.
Please know that we are here to answer any questions or comments you might have about these ideas. You can contact me at steve@efggrp.com or 877-304-1369. Trading futures is risky. Please use sound risk management in any trades you consider or attempt.