Although the dollar is surging thanks to the new tone on the U.S. economy, the technical picture indicates that the gains may be topping out soon.
DXY is a crowded trade right now, rising on general sentiment but it looks like there are only a few more days — at most — here before the recent thrust takes the dollar index up into some pretty heavy overhead resistance.
It does look like DXY will ultimately respect the 20-day moving average, which is currently trending at around 80. If anything, right now the DXY’s current level of 80.40 looks a little overbought beyond the short term.
But in that short term, a reasonable top to look for would be 80.75. It is fairly unlikely that we will see it hop up beyond 81.70 — where the hard 200-day resistance is — in any event. [Related ETFs: PowerShares DB US Dollar Index Bullish ETF (NYSE:UUP), PowerShares DB US Dollar Index Bearish ETF (NYSE:UDN)]
We might get real job creation tomorrow to keep the sentiment running high, but unless the big boys truly are unwinding USD/CHF or USD/JPY trades, the dollar may not get much stronger from here. This, in turn, would make it safe to take another look at your commodity and emerging currency trades.
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.