The U.S. dollar has been on fire.
It rose 4% over the past month. That’s a good gain for a stock. But it’s an outrageous gain for a currency.
We first turned bullish on the buck in early April. Despite the dollar going almost nowhere for two weeks, we stayed bullish on it in mid-April. Then, after the dollar popped sharply higher at the end of last month, we argued the rally still had room for more upside.
Today, though, it looks like the dollar rally has run its course – at least in the short term. It’s time for the buck to pull back.
Take a look at this updated chart of UUP…
UUP has reached our upside target – matching last December’s high of about $24.40. But notice how far extended UUP is above its 50-day moving average (MA) – the squiggly blue line. UUP rarely moves more than 2% away from its 50-day MA before reversing and coming back towards the line. Yesterday, UUP traded nearly 3% above it.
Notice also the extended conditions of the MACD and RSI technical indicators. Both of these momentum-based indicators are at their highest levels of the past year. That’s an extremely overbought condition, which is going to make it tough for the dollar to push even higher – without suffering through at least a short-term pullback first.
For these reasons, it looks to me like the big bounce we’ve seen in the buck over the past month is just about over. Look for the dollar to come back down towards its 50-day MA – or for it to pause and give the 50-day MA enough time to catch up with the current price.
That sort of action will relieve the overbought conditions. And it may set the stage for another rally attempt a few weeks from now.
For now, though, the buck looks poised for a pullback.
Best regards and good trading,
Jeff Clark
P.S. Even the dollar isn’t safe from the volatility this year…
That’s why tomorrow night at 8 p.m. ET, I’ll be holding a free online training event to make sure you’re ready for this distinct market environment.
If you haven’t signed up for this event yet, or received your free training videos, there’s still plenty of time. Learn more here.
Reader Mailbag
Today, some updates from Delta Report subscribers…
Thanks Jeff – just made 59% on our RRC option. Appreciate it very much. Thanks for your hard work.
– Mike
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– Ryan
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– Richard
And some excitement for tomorrow’s big event…
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