This week, it’s the dollar’s turn to make a move.
After a tremendously volatile month of March – when the U.S. dollar dropped 4% early in the month, and then rallied 9% later in the month – the buck has been eerily quiet over the past six weeks.
But, it’s now setting up for a big move…
Take a look at this chart of the U.S. Dollar Index…
The U.S. Dollar Index has been stuck in a tight trading range between 98.5 and 100.5 since late March. This action has created a consolidating triangle pattern – with a series of slightly lower highs and slightly higher lows. And, we’re approaching the apex of the triangle.
The buck is poised to break out of this pattern in one direction or the other. And, that breakout is going to have consequences for gold, silver, agricultural commodities, Bitcoin, and any other asset that typically trades in the opposite direction of the dollar.
As the dollar goes up, the prices of these other assets typically go down. And, vice versa.
The chart of the dollar doesn’t provide any clues as to which direction it will break. All of the technical indicators at the bottom of the chart are in neutral territory. And, the chart of the dollar itself is sitting right in the middle of the big, volatile move in March.
It could go either way.
So, the purpose of this essay isn’t to tell you which way to bet. We’re not going to try and predict the dollar’s next move. We don’t have an edge here.
But, traders should keep an eye on this chart this week and be ready to make a move when a breakout happens. A breakout above resistance at about 100.20 should lead to a quick and forceful move higher. That will put pressure on the prices of metals, commodities, and cryptocurrencies.
If the dollar breaks below support at about 99.20, then we’ll likely see a quick move lower. In that case, all of the inversely correlated assets should rally.
Best regards and good trading,
Jeff Clark
Reader Mailbag
In today’s mailbag, Rob and Ross share their experience being Jeff Clark Alliance members…
I recently joined as an Alliance member and looked at some trades you’ve recommended. Then I saw a trade that had not moved out of the buy range. So, I bought a put option and I’ve made enough money to pay for my lifetime Alliance membership. Thanks.
– Rob
I love your trading style since it’s similar to mine and I’ve done better in bear markets than in bull markets over my career. I’m so glad I joined the service to increase my knowledge and see what equities, ETFs, and options you’re looking at.
When you show what you’re watching, and I see what appears to be a somewhat
irrational move, I can’t help but to remember the mantra we had in crude oil trading… “The market can remain irrational longer than you can remain solvent!”– Ross
Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at [email protected].