The Dollar Is On Fire

A rising tide floats all boats, as long as you’re swimming in equities apparently. Currencies, futures, and bonds however have been selling off hard since the launch of the post election Dollar rally. How far it’ll manage to run remains anyone’s guess (although I have some ideas) but it seems that it may at least be taking a little breather – for now that is:

The Bollinger overlays show us the Dollar breaching both upper thresholds and currently retracing a little which I would consider as rather normal. From here we usually either see a retest of the upper 100 (1) which may involve a dip back inside, allowing the BB to catch up while price establishes a new base for continuation higher. Alternatively we may see a more thorough correction and that one may drop us all the way back down to 99.5 (2). Although I am enjoying an increasingly favorable EUR/USD exchange rate over here in Europe either scenario would be very useful for us in terms of getting positioned.

Speaking of the EUR/USD – shown here are the 6E CME futures which are almost identical. I just took out a short position however I am prepared to flip for a long should it manage to climb above 1.06685. We are actually having ourselves a very nice inflection point here in that the Euro managed to climb back towards its daily NLBL at 1.06685. Should it push above it then I expect a little rally with a price objective of around 1.09 plus.

On the bearish side this is one of those Last Kiss Goodbye setups which may launch a late trend move toward the downside. Very few people expect even more Euro weakness at this point, and that is exactly why I am still considering this as a scenario. The target area may be near par on the Dollar or even lower. Frankly I give this scenario about 30% right now although I am currently holding short. Odds still support at least an attempt to burn some of the laggard Euro shorts.

But wait – I kept the best one for my intrepid subs:

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