MINYANVILLE ORIGINAL Again, not much has changed since my update from last week, as risk markets continue to grind higher as volume dwindles in the markets. It seems like a lot of traders are taking advantage of these last few weeks of summer to stay out of the office! The US Dollar Index is starting to turn higher right around the 82.5 support level that I have been highlighting for a couple weeks now. The markets might remain quiet for the balance of the summer, but it looks like the DX is forming a nice base to fuel a new leg higher.
The euro has also started to fail just below the 1.25 resistance level, and I think it could be getting ready for another move lower. I continue to like the risk reward of euro short positions, and the next leg lower could very easily take the euro below the 1.20 support level. Longer term, I still believe the euro could trade back to parity and below the US dollar, so I would continue to sell any rallies and increase short exposure to the euro. The downward trend in this market is pretty clear!
The British pound remains one of my favorite risk reward setups at current levels. As you can see in the below chart, the pound is consolidating just below the 200 day moving average, which I think provides a nice backstop to increase short exposure to this market. When the US Dollar Index rally starts, I think the pound could move sharply lower and easily break below 1.50. Using a 1.575 stop on short positions here just below 1.57 provides a really great risk reward, and now is the time to take the risk!
