‘Anti-USD’ Rally Status

The USD is bouncing from the projected support area around 94.  Further, some economic data came in firm this week and ISM was stable, with its exports component bouncing solidly.  That was in keeping with the weakening dollar easing the pressure as a rising dollar had increased it.  Continued firm data could attend an expected bounce in USD.

What does it mean?  For me it means that the anti-USD rally in commodities, commodity currencies and precious metals is ending for now.  I am not saying that some of these cannot continue upward short-term, but I am saying that there is now too much risk of a USD bounce for any investment stance to be based on a weak dollar.

Here is the USD chart from a public post earlier today.  It is undetermined whether or not this was the entire correction or further downside lay ahead.  But either way, we expected support and a bounce at 94 +/-.

usd

We began the week talking about FOMC, volatility and economic data.  Here is how the data shook out.  I have highlighted the items that I consider to have meaning.  The more relevant data were mostly stable to firm (GDP is back-looking), and even though it was flat, that includes ISM in that its exports component bounced as noted in this public post.  That’s a weak USD self-fulfilling prophecy.

econcal

Bottom Line

With reference to the Aussie dollar chart reviewed earlier in the week, many anti-USD items have bounced to or toward potential resistance points.  That includes the Euro.  So whether or not one chooses to hold assets, our analysis states that the ‘anti-USD’ trade is done for now.  i.e. a weak USD should no longer be a reason for investing or trading at this time, in my opinion.

As for the precious metals, I am impressed by the miners’ ability to thus far hold support (ex. GDX @ 20, HUI @ 180) in the face of gold and silver weakness.  Note however, that the GDX-GLD ratio (or HUI-Gold) is at a moving average that has contained previous rallies just as USD is grinding around looking for a bounce point.  I would have caution until/unless the ratio strongly puts this limiter in the rear view mirror.

gdx.gld

See you Sunday with NFTRH 341!