The U.S. dollar continues to creep slowly but surely upward as the euro steadily sinks week after week. After the dollar survived a plunge below the 200DMA that I thought marked the decisive end of its previous relief rally, the currency has faithfully followed its 50-day moving average (DMA) to higher ground. On Wednesday, the dollar index even broke to new 5-week highs before settling back into the current uptrend channel.
Source: FreeStockCharts.com
I am now expecting the dollar’s upward bias to continue. It could easily break the October highs in due time. If so, this event will mark a significant breakout for the dollar that could accelerate the move to higher prices.
As this pattern resolves itself, I am trying to prepare better for a fresh plunge back BELOW the 200DMA. I have stops set up, I am locking in profits, and I am gradually adding to my long positions on the Australian dollar, especially against the U.S. dollar (note that the dollar index does NOT include the Aussie).
Be careful out there!
Full disclosure: net long the U.S. dollar; long the Australian dollar and FXA; net short the euro