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U.S. Dollar Trending Higher As Primary Global Reserve Currency

By Chris VermeulenForexJul 06, 2022 11:19AM ET
www.investing.com/analysis/us-dollar-trending-higher-as-primary-global-reserve-currency-200626762
U.S. Dollar Trending Higher As Primary Global Reserve Currency
By Chris Vermeulen   |  Jul 06, 2022 11:19AM ET
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The U.S. Dollar is one market that continues to stand out as a stronghold for traders and investors. The world's primary reserve currency, the USD, remains solidly above all other major global currencies.

As we move into the summer, the stock indices have not only been choppy but continue to trend lower.

Commodities, metals and energy appear to be topping and experiencing distribution.

U.S. Dollar Performance Chart.
U.S. Dollar Performance Chart.

Source: www.finviz.com

Cash is king as traders are now placing a value on liquidity. As losses mount and capital evaporates, traders are liquidating many different assets to meet margin calls and raise needed cash.

Going to cash and salvaging what is left is a survivalist strategy. It has many benefits providing peace of mind as well as the future potential to generate significant returns down the road. If a trader does nothing and their capital continues to evaporate, it can be fatal to a trader’s overall attitude and hinder their ability to generate future profits.

Markets go up, and markets go down. What makes the big difference is how we manage risk and how well we do in following the direction of price. Knowing and controlling one’s emotions dictates how long we can play the game or how successful we will be.

Now is not a good time for traders to become complacent or ignore their basic money management and risk principles.

U.S. Dollar 14-Year Up Trend

  • U.S. Dollar has been up 14.28 years from 2008 to 2022.
  • 2012-2016 U.S. Presidential Cycle: USD appreciated +37.20%
  • 2016-2020 U.S. Presidential Cycle: USD depreciated – 12.80%
  • 2020-2022 U.S. Presidential Cycle: USD appreciated +17.35% to date
  • U.S. Dollar New 14-year high

US Dollar Index Weekly Chart.
US Dollar Index Weekly Chart.

U.S. Dollar ‘UUP’ ETF +16.96%

  • January 6, 2021, to present USD ETF Invesco DB US Dollar Index Bullish Fund (NYSE:UUP) + 16.96%
  • Pullbacks or corrections have typically been 3-4%
  • Pullbacks or corrections have typically lasted 20-50 days
  • Price target extensions for potential resistance are at $36, $42, & $48

DB ETF Daily Chart.
DB ETF Daily Chart.

U.S. Dollar V. U.S. Equity Indices

  • Comparative Percentage Chart: U.S. Dollar ETF VS U.S. Equity Indices ETFs
  • Timeframe: Jan. 6, 2021, to present
  • 372 bars, 539 days, 77 weeks, 17.9 months, or 1.47 years
  • +10.65% WisdomTree Bloomberg U.S. Dollar Bullish Fund (NYSE:USDU): Wisdom Tree Bloomberg U.S. Dollar Bullish Fund
  • +2.75% SPDR® S&P 500 (NYSE:SPY) ETF: S&P 500
  • +2.61% SPDR® Dow Jones Industrial Average ETF Trust (NYSE:DIA): Dow Jones Industrial Average
  • -8.15% QQQ (NASDAQ:QQQ) ETF: Nasdaq 100
  • -12.01% iShares Russell 2000 ETF (NYSE:IWM) ETF: Russell 2000
  • Maximum spread equals 22.66% (+10.65% USDU vs -12.01% IWM)
  • Forecast is that the spread will continue to expand

ARCA Daily Chart.
ARCA Daily Chart.

U.S. Dollar Trending Higher As Primary Global Reserve Currency
 

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U.S. Dollar Trending Higher As Primary Global Reserve Currency

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Comments (2)
Irvin Mermelstein
Irvin Mermelstein Jul 07, 2022 8:30PM ET
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Good news. The Chinese have wanted to be the global reserve currency, but the US economy remains resilient, with inflation getting the speed and level of interest rate hikes that are needed.
Stephen Fa
Stephen Fa Jul 06, 2022 12:33PM ET
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Comparing ETFs which are denominated in dollars to the USD value (before inflation) compared to other FX rates seems "apples and oranges" to me.
patricio Silva
patricio Silva Jul 06, 2022 12:33PM ET
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