If you go back in time and read comments from two-to-three weeks ago, I called for deprecation in the dollar and the market delivered. I bring this up because the move happened a lot quicker than I anticipated…from the high made 5/23, June futures are lower by 3.3% in just over two weeks. That said, I expect a “dead-cat bounce” from here.
Line In The Sand
The 61.8% Fibonacci levels (lower white jagged line) appears to be the line in the sand as prices are bouncing from oversold levels…see stochastics on the daily chart below.
So where to from here? I anticipate a move back to the 50-day MA (dark blue line) and quite possibly the 20-day MA (dark blue line) in the coming weeks.
Other Instruments And The USD
As always, when I do analysis on the greenback it's not because I am establishing a bullish or bearish play for my clients in the dollar, but rather it will dictate how I trade other instruments depending on their relationship to the dollar.
Markets that I think could have a direct inverse relationship if this plays out are the Swiss franc, Euro, Cable, Cocoa, Crude oil and metals complex. Those long European crosses should tighten up stops. I like probing bearish plays in cocoa and Crude oil. As for the metals, gold and silver continue to tread water, but on a 1.5-2% advance in the dollar we may get a washout in metals dragging silver under $20/ounce and gold closer to $1300. in my opinion.
Perhaps an argument can be made, technically, when looking at the daily chart above that we resume a move higher, but please take a look at a weekly chart and convince me that the depreciation in the last three weeks may not be the beginning of a larger move that drags the dollar back under 78.00…levels not seen in fifteen months. On the docket domestically in the coming week is CPI, PPI and a FOMC meeting…stay tuned.