U.S. Dollar Rout Continues Amid Disruption In Foreign Relations

January 31, 2017 2:00pm NYSE:UUP

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It’s getting pretty hard to ignore the U.S. Dollar slide that has occurred since peaking against global currencies at the very beginning of 2017.


The PowerShares DB US Dollar Index Bullish (NYSE:UUP) (Expense Ratio 0.80%), the largest U.S. Dollar tracking ETP in the U.S. listed marketplace at $845 million in AUM has viciously sliced through its 50 day moving average, without recovering during the past nine trading sessions. That includes a real bludgeoning today, which is bringing UUP down to its lowest levels since Trump’s election.

Market observers will note that the U.S. Dollar spiked to new recent highs from the moment Trump was elected as President, and through the end of 2017, only to crater recently against global currencies. We are watching specifically the Euro, tracked by FXE Guggenheim CurrencyShares Euro Trust (NYSE:FXE) (Expense Ratio 0.40%, $220 million in AUM), which is spiking today and trading at its highest levels since the beginning of December. Neither fund has substantial flows year-to-date, as UUP has seen some position reduction with $46 million leaving the fund via redemptions during this time frame.

One of course cannot mention the Euro without mentioning “Brexit,” which is still being hemmed and hawed about to the point where “negotiators” have been appointed by the European Union to oversee the transition, including chief Guy Verhofstadt. An article on Zerohedge.com titled “Martin Armstrong Warns EU Just Declared US Is The New Enemy” cites some interesting and perhaps alarming to some rhetoric that does not seem to be covered by the mainstream news yet. Specifically, during a recent speech at a think-tank, Verhofstadt is said to have stated the following: “We have a third front, for the moment, undermining the European Union, and it is Donald Trump. Trump spoke very favorably of the fact that also other countries will want to break away from the European Union, and that he hoped for a disintegration of the European Union.”

Whether or not the Trump “threat” is imagined or real is not up to us to decide, but one thing is for sure, and that is this tension between Europe and the U.S. is unparalleled for what we can recall into a new administration. The independent event of “Brexit” has not helped matters as far as those proponents of EU solvency are concerned, but that has not stopped negotiators hired to apparently mediate the transition occurring from a past event from bringing current issues to the table as well.

In anticipation of continued volatility in the U.S. Dollar, Euro, as well as the British Pound space, in addition to UUP and FXE we are surely watching the following funds in the next several months: Guggenheim CurrencyShares British Pound Sterling Trust (FXB) (Expense Ratio 0.40%), ProShares UltraShort Euro (EUO) (Expense Ratio 0.93%), PowerShares DB U.S. Dollar Index Bearish (UDN) (Expense Ratio 0.80%), WT Bloomberg U.S. Dollar Bullish (USDU) (Expense Ratio 0.50%), ProShares Short Euro (EUFX) (Expense Ratio 0.95%), and ProShares Ultra Euro (ULE) (Expense Ratio 0.95%) are all on radar at this point.

The PowerShares DB US Dollar Index Bullish (NYSE:UUP) was trading at $25.74 per share on Tuesday afternoon, down $0.20 (-0.77%). Year-to-date, UUP has declined -2.72%, versus a +1.48% rise in the benchmark S&P 500 index during the same period.

UUP currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 25 ETFs in the Currency ETFs category.


Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.


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