• 312 days Will The ECB Continue To Hike Rates?
  • 312 days Forbes: Aramco Remains Largest Company In The Middle East
  • 314 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 714 days Could Crypto Overtake Traditional Investment?
  • 719 days Americans Still Quitting Jobs At Record Pace
  • 721 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 724 days Is The Dollar Too Strong?
  • 724 days Big Tech Disappoints Investors on Earnings Calls
  • 725 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 727 days China Is Quietly Trying To Distance Itself From Russia
  • 727 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 731 days Crypto Investors Won Big In 2021
  • 731 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 732 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 734 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 735 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 738 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 739 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 739 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 741 days Are NFTs About To Take Over Gaming?
Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

  1. Home
  2. Markets
  3. Other

Dollar Direction Dependent on UUP

US Dollar Index Bullish

On Monday, the Powershares US Dollar Index ETF (UUP) celebrates its 4-year anniversary. Despite its short existence, the UUP has provided a clear-cut way to play the greenback. In both cases when the UUP clears the 23 level, the US Dollar Indextends to breakout to the upside.

Following the Bear Sterns collapse, the UUP was in the process of forming a base at the 22 level. In the ensuing months, price-action held within a tight range between 22 and 23 up until the Lehman bankruptcy. As a result of the panic selling in September 2008, the UUP managed to clear the key 23 level. This triggered a dramatic recovery that climaxed at all-time highs.

Just over a year later, the UUP was back down to the 22 handle. Once again this key level provided support. However, this time it was risk aversion inspired by the fallout of Dubai's debt problems that allowed the US Dollar to carve out a bottom. After briefly respecting the 23 level as resistance, the subsequent clearance led to a powerful 10% rebound.

The US Dollar Index eventually reached a peak back in June. This coincided with the finalization of a comprehensive rescue package that ensured financial stability across Europe. The introduction of additional quantitative easing by the Federal Reserve provided a further drag on the dollar, triggering the latest test of the 22 region.

Recent euro weakness, stemming from Irish sovereign debt concerns has allowed the UUP to recover from the 22 region. This has enabled the dollar to bump up against key resistance. While Tuesday's rejection at 23 maintains the ongoing bearish structure, history suggests that while 22 remains supportive, the UUP should be accumulated.

If the 23 level is sustainably broken, then the US Dollar should appreciate significantly. In the previous two occasions, initial strength reached the 24 level before eventually targeting the 26/27 area. If 23 continues to cap, however, then the dollar's recovery could be in jeopardy. A move below 22 support would translate into uncharted territory for the UUP.


Back to homepage

Leave a comment

Leave a comment