Home Stock Market Commentary As The US Dollar Rally Stalls Out I Just Took Two Positions...

As The US Dollar Rally Stalls Out I Just Took Two Positions In These Key ETFs – Mike Swanson (03/12/2021)

Market futures are down as I write this, but notice that the DOW futures are barely down at all while Nasdaq futuers are down over 200. It’s another example of how we seeing sector rotations in the market where tech is weakening against “real world” stocks as commodities and bond yields made secular bottoms last year.

Since New Years we have seen an oversold rally take place in the US dollar. This helped to cause some selling to come into gold, but now that US dollar rally appears to be losing momentum. The US dollar remains below its 200-moving average and has been below it since June. That indicator is now resistance, which is one of the textbook characteristics of a bear market. Notice on this chart of the US dollar index that its daily stochastics are above 80 and its RSI indicator on the bottom recently hit 70 after having gotten to a low 30 back in November.

Levels below 30 on the RSI indicator extreme oversold conditions, such as those reached last August and December. When currencies are in a bear market, though, instead of big rallies you get typically weak ones that end being simple sideways pauses in an overall bear trend. You can see how this played out back in August.

It appears that the current US dollar rally has reached a peak and we can now look for the US dollar index to drift towards another breakdown in the coming weeks. This is a positive for gold and it also is a positive for major world currencies that opposite to the US dollar index.

I just took a position in two of them using ETF’s that track them. The first is FXE, which owns Euros.

I put the dollar index on the bottom of this chart so you can see how the Euro pulled back after New Years as the US dollar index bounced. Now the FXE ETF reached an oversold level and has turned up. Another good up day or two will cause its daily stochastics to cross back above 20 to give a buy signal. I bought with a mental stop below its 200-day moving average. Recent lows should act as base building support zone just as the 93 area should act as key resistance on the US dollar index.

I also bought FXF, which tracks the Swiss Franc.

I actually bought both of these ETF’s months ago in the Fall and simply sold them about four weeks ago and took the profits. Now I bought them back. Of course there are many who trade currencies straight out via the futures market or FOREX.

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If you have any comments, thoughts, or questions about the markets today just scroll on down to the bottom of this post to the comments area.