As you may know I took on the EUO Euro short again yesterday in order to hedge a potential US dollar bounce. A new leg up in USD would impair or pressure precious metals, stocks and commodities to varying degrees. Aside from my positions in precious metals, stocks and commodities I also consider it a hedge to the long positions in GBTC (Bitcoin tracker).
So a hedge position in a USD correlated vehicle does not mean ‘bullish USD’. It means…
The hedge is held pending the currency moves that inform it (a tight mental caution/tolerance on EUO of 24 was noted in the trade log) and EUR/USD has the potential to break consolidation here. It’s much like the consolidations going on in gold stocks, not so coincidentally. It could be a fake out or it could develop into a new bull move. We should know soon.
As for the USD index, if EUR’s RSI looks constructive DXY’s looks suspect now. The index price is right at the tolerance point below which I’ll have to make a decision.
The political and monetary policy game plan has been stated (in not such direct words) as ‘weaken the dollar in service to rising asset prices’. The above pictures show that game plan on the verge of resuming.
The stock market is bouncing from logical short-term support, commodities remain buoyant and gold stocks have not broken down from those flags (which means they’ve not confirmed they actually are bear flags). The coming move in USD, whether down or up will inform those asset markets.