U.S. Dollar Looking to Rebound as it Retests Support
Since early April, the U.S. dollar has largely been in a trading range against most major currencies. For many, the ability to understand how to track the dollar can be difficult. The strength of a currency is typically measured against another currency. Typically, the dollar is paired with the Euro as the Euro is the most widely held outside of the dollar. As a result, it is the most important relationship to monitor.
The difficulty of trading these direct relationships between the dollar and an individual country’s currency is that it would require a forex account of the ability to trade futures. Luckily, there are ETFs that track the dollar against a basket of foreign currency. The Invesco DB US Dollar Index Bullish ETF (UUP) is a fund that accomplishes this. It carries a weighting of 57.6% to the Euro, and so a major consideration for forecasting direction fundamentally is based on the Euro.
The price of UUP, as well as the EUR/USD, has been range-bound since the beginning of April. The range is between $26.75 to $27.25. As the price recently tested the support on Wednesday, the price began to rise on Thursday. The indication is that the price is establishing support and will move higher to resistance.
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The $0.50 range is obviously a little small, but the near-term potential could cause the price to extend toward the March high near $44. However, you can use leveraged ETFs and ETNs to make more money with a small move in the price.
The VelocityShares Daily 4x Long USD vs EUR ETN (DEUR) is a way to do this. The 4x daily leverage is a means that it won’t track perfectly, but for short-term holding periods it will come pretty close. For DEUR, you’re going short the Euro and long the USD. The near-term target is $40.50.