US Dollar Resurrection
I am a Trend Trader.
One of my most popular and simple indicators is a new high or a new low in a currency.
I particularly like a new 20 Day High or 20 Day Low. There is nothing magic about 20, so anywhere near 20 days will do.
This last week has seen the US Dollar make a NUMBER of new highs. Let’s have a look:
1. The USD dollar index went to a new 29 Day High.
2. USD Euro went to a new 20 Day High.
3. USD Aussie went to a new 18 Day High.
4. USD CAD went to a new 20 Day High.
5. USD CHF went to a new 17 Day High.
6. USD GBP went to a new 19 Day High.
7. USD South African Rand went to a new 42 Day High.
8. USD Singapore Dollar went to a new 18 Day High.
9. USD Norwegian Krona went to a new 32 Day High.
10. USD Hungarian Forint went to a new 32 Day High.
11. USD Swedish Krona went to a new 34 Day High.
When all these happen at once, this is known as convergence which is far stronger than if just two or three instruments signalled.
Also, the US Dollar Index has just come from its lowest level EVER on 4 May 2011.
There has been a massive one way bet selling the US Dollar short.
Am I saying that this is the turning point? I don’t know, I am a simple trend trader, but the charts tell me that something is changing.
On Friday before the close of trading I went long the US Dollar. I am only risking 1.3% of my trading capital, but if all the people who are short start buying back their short positions this move could accelarate and I will be long the USD near the beginning of the move.
The other thing I like about the signal is that it most of the breakouts show convergence on the MACD and RSI, which means both the MACD and RSI are breaking to new highs as the price breaks to new highs. This is also excellent convergence.
Happy Trading
Oli Hille
Author
“Creating the Perfect Trade”
Thanks for that Oli. I too have come to the same conclusion based on the ‘key weekly reversal’ by the USD Index two weeks ago and a number of ‘bullish engulfing days’ since (Friday was one incidentally). Thinking we could have quite a significant period of USD strength over next couple of weeks and whose to say it’s not the whole end of the multi year USD weakness?