Checking in With Uncle Buck

With the bottom and bounce stance on USD I feel I’ve been wrestling a bear. He’s got long, sharp claws and a gaping maw full of teeth and I’ve only got a brain (w/ contrary wiring), bare hands and a pop gun. Yet, if USD holds current support and turns up we are going to eventually see changes settle into the market landscape.

He who went up against a declining USD (like US stocks, EMs, bouncing commodities, etc.) should eventually suffer a decline against a rising USD. He who was relatively weak against a declining USD (precious metals) would probably still go down but suffer less either in price or time before signaling a would-be inflation phase out ahead. That’s the operating theory at the moment, at least.

Daily USD index courtesy of TradingView and our friends at Biiwii.com 🙂 in the form of amazingly simple charting you can do for most any symbol and many currency pairs and asset markets. The Hammer made during FOMC punt week did not hold. Let’s see if the cluster beginning last Thursday can.

usd

The weekly shows that a support level at 94 (my original downside target) was busted.

usd

And the monthly shows that Uncle Buck is at key support, which has been tested – and as such, potentially weakened – multiple times.

A longer-term monthly correlates this support (2015 & 2016 lows) with the 2004-2006 highs. If these break down the next support is in the 88 area (2009-2010 highs).

usd

I am short the Euro as USD/EUR settles into a long-term support area of 84 to 82 after busting support around 87.

usd/eur

The reason I am nursing this short is…

euro hedgers

Look, I have often been right as a contrarian. But it is not ever easy. In fact, you (and your frail human psycho-dynamic) are often made to feel stupid by the market. But I keep remembering that herds piled into trades in their late stages are the ones who overwhelmingly prove to be stupid after all, again and again. The key is in how long you can hold out against said thundering herd… or said bear baring his claws. You can’t ride conviction, and capital forever. But for now, ever plucky, I hold the line and plan for the prospect of a USD bounce. The real fun would come later, after a strong bounce in USD.

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