We believe that charting the U.S. Dollar gives active investors an edge in planning their forex trades, especially trades in EURUSD. This post highlights a trading opportunity that we are watching closely that might develop within the next few months. It is based on the analysis in our forthcoming eBook, which will be available at our Amazon page next week.
The PowerShares US Dollar ETF (UUP) has broken through the upper channel boundary and also through the first target at 24.87 based on a Fibonacci 1×1.618 measurement up from the 2011 and 2014 lows.
We also see exhaustion signals from the Wave59 “nine-five” indicator, which is a fairly reliable sign of an impending pause or reversal. The “8” above last week’s price candle suggests that the current segment of the pattern is almost finished. A “9” is one of the possible completion signals.
The next extension price target for the US Dollar ETF is at 25.74. This price target represents a 1×2 measurement from the lows mentioned earlier, and it also is not far from the current position of the channel harmonic, drawn on the chart with a dotted line.
This suggests that traders who are currently in positions aligned with expectations of a rising US Dollar should tighten their stops. While we believe it is probably too late to attempt new trading long positions with the Dollar, it also is too early to enter short positions. The next trade window probably will be in the spring, and we will examine the timing more closely in our eBook. Note that the counterpart US Dollar ETF that offers a short position in the Dollar has the ticker symbol UDN. Thanks for reading and have a great week.
US Dollar ETF (UUP) Weekly Chart
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No position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.