Dollar Correction Coming?

Hedge funds are jumping back into the US dollar, while the price has made a lower high

Dollar Index vs COT 2008-2015

Source: Short Side Of Long

Yet another Non Farm Payrolls Friday and yet another interesting price development, where traders’ speculate on future action of the FOMC. Looking at the action in the US dollar trend, the price of the index posted an outside reversal day on Friday. The powerful rally, which started in the middle of 2014, has failed to make a higher high (so far) and has not traded below its 200 day moving average for over 12 months.

Moreover, hedge funds and other speculators have recently jumped back into the dollar. To me, therefore, it’s looking increasingly likely that the greenback’s uptrend is about to experience a correction below the uptrend line. Of course opinions aren’t facts and none of these indicators necessarily guarantee a sell-off. However, speculators have been given a signal (outside day reversal) and a price level at which to place a stop loss (above 98.50 on the index or below 1.0850 in the euro).

Good luck speculating!

The dollar hasn’t fallen below 200 day MA in 12 months, so watch for a mean reversion

USD Index vs % Away from 200 MA

Source: Short Side Of Long

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