Managing Editor’s Note: Before we get to this morning’s edition of Market Minute, we’ve got an exciting announcement…
Jeff has teamed up with TradeSmith – the premier provider of fintech software, helping investors thrive in bull and bear markets for 20 years.
It’s also a financial newsletter behemoth featuring in-depth market analysis from some of the best and brightest names in the industry.
At the heart of this partnership, both TradeSmith and Jeff are dedicated to helping everyday investors navigate highly volatile periods, like we’re in now, so you can profit on both the ups and downs in markets, while exposing yourself to the least amount of risk.
To reflect this partnership, Jeff Clark’s Market Minute will soon become TradeSmith’s Market Minute.
Don’t worry, you’ll still get the same, quick-hit market analysis from Jeff three days a week… we’ll just be adding other expert analysts into our rotation… So be on the lookout for that.
As always, any questions or comments – good or bad – let us know at [email protected].
Time to Take Profits on the Dollar Short
BY JEFF CLARK, EDITOR, MARKET MINUTE
The dollar decline is just about over.
The US Dollar Index (USD) peaked at about $110 in mid-January. It’s trading near $103 today. That’s more than a 6% decline in the dollar in just the past two months.
That probably doesn’t seem like a big deal – especially for stock traders who are used to seeing large, chaotic moves in their portfolios.
But, for a currency, a 6% drop in two months is a BIG move.
And, if you took our advice and shorted the dollar in mid-January, then it’s time to take profits on that trade.
Here’s the updated chart of the US Dollar Index (USD)…
When we looked at this chart in January, we noted the dollar was trading at its highest level in a year.But, there was negative divergence on all of the momentum indicators at the bottom of the chart.
This condition is often an early warning of an impending decline. So, we suggested the dollar rally was ending. It was a good time for aggressive traders to short the buck.
Now, after a 6% decline in two months, it’s time to exit that trade.
The dollar is oversold. It’s trading far below all of its various moving average lines. And, those moving averages are extended far away from each other.
There’s not enough fuel left to push the dollar much lower from here.
Traders should also note that the Relative Strength Index (RSI) is below 30. That’s another indication of an oversold condition. It’s rare for the RSI for the dollar to reach such an extreme level. The last time it happened (in late August 2024) it signaled the dollar was near the end of its decline phase.
Of course, that doesn’t guarantee the buck is going to rally immediately from here. But, it does suggest there probably isn’t much downside left in this current decline.
So, rather than risk giving up some of the gains achieved over the past two months, traders who shorted the dollar on our suggestion in January should take their gains off the table today.
Best regards and good trading,
Jeff Clark
Editor, Market Minute
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