Trading the Dollar Swing Change - Or Not

Includes: UDN, UUP
by: The LFB

For the first time in 3-4 weeks we are seeing mixed trends against the Usd, moving quickly from strong short trends that had the dollar getting easily sold recently. Add to that the mixed momentum reads, and red flags are coming out. This is a swing change, and until a live U.S. session of cash market trade confirms the futures market momentum, we may need to set very tight targets.

It looks as though the dollar buying from Friday has rolled over to some degree into Monday trade, however it is doing so on very light volume levels. Take care here, until the swing point confirms.

Open Signals: Outside of cable, the most volatile pair we have, there has been very little movement, with most pairs stuck to their neutral pivot point areas, where there were as many buyers as sellers in the previous session. The Monday review reveals a major swing change setting up, and shows that trends are changing, and momentum is struggling to keep up with things. The U.S. Cash market may help set the scene, but on the first trading session of the week the order flows are very light, and really sporadic.

4 Hour Chart Forex Trend and Momentum Updates:

We still have short-dollar trends, and also have very mixed Usd momentum reads on the major pairs. That leads to one of two things happening. Either, we are seeing a swing change that starts to set up a period of Usd buying ahead of the FOMC rate decision and statement on Wednesday. Or, the major pairs have pulled back to support in anticipation of making the next leg higher against the Usd.

Either way, a straddle will catch the variables that fall in between, as the period of consolidation that holds existing positions and weathers the storm coming from the Usd, or distribution takes place where longer-term holdings have profit banked, and if it is a swing change, the reverse orders placed.

4 Hour Chart Usd Trend and Momentum Updates:

A really mixed momentum read is in play on global equity and commodity markets, that now may have to quickly get aligned this week to the overall long trend on the Usd drivers, that has held the dollar down for the last 5-6 weeks.

For equities to hold higher as earnings season trade comes to a halt, there will need to be strong support coming into crude oil trade. Right now, these two markets need each other to be able to hold valuations. Either one starting to show signs of fatigue will easily draw in moves that bank recent profit. Equities and oil are on the opposite side of Usd moves; Equity and Oil down = Usd up, and vice versa.

Long trends seen on the member area charts look to be having their first real test for three or four weeks, and the resulting moves may set the tone for August trade. In bull markets, August is the third best returning month of the equity year, however when August dips, it does so in a big way. Let the games begin.

Disclosure: No Positions