Here’s What’s Next For The Dollar Index
FX:
The past three trading days have seen us taking
stabs at the long side in USD/CHF because we use it as a proxy for the US dollar
index which has heretofore confirmed our forecast for an “ABC” type move in
“wave B” into the first week of September. We forecast this move nearly a month
ago when we said the dollar’s breakdown would target key support at 87 where we
would look to position long. Three weeks ago we went long at the level via USD/CHF
at 1.2785 and took profits near the top.
The bottoming process in USD/CHF has taken the
form of a broadening top which is frustrating when you place stops below the
previous day’s lows. Recall that on Friday we reentered long USD/CHF at 1.2550
and on Sunday we looked to either add to this position or move our stops up. The
sudden collapse (which we imagine was Hurricane news related) forced us to close
at 1.2535 and we reentered again at 1.2550 last night.
We still like this position because as you can
see in the chart below the US dollar index has recorded back to back daily
bullish reversals right on key channel support crossing at 87.50. As we said on
Friday, “If channel support holds we expect to see another up leg in USDX into
the first week of September. Therefore, our work with Elliott Wave and
seasonality both suggest that we could still see the next leg up towards 89.00
in the coming days to weeks before the possible “September Mini-Crash” scenario
we have been talking about.”
Stocks:
There is little to add here. Stocks are lower,
but heading into key support at the 1,200 level. In our weekly report we showed
subscribers that we expect a bounce off of this level for the next couple of
weeks followed by a break below here which will see intensified selling
pressure.
Bonds:
As we have said for the past few weeks, an
expected decline in stocks would likely force more players to go long bonds,
which they are doing now as the 10-year yield pushes back to 4.0%.
Regards,
Jes Black
FX Money Trends
613 4th St Suite 505
Hoboken, NJ 07030
Tel: 646.229.5401
Jes
Black is the fund manager at Black Flag Capital Partners and Chairman of
the firm’s Investment Committee, which oversees research, investment and
trading strategies. You can find out more about Jes at
BlackFlagForex.com.
Prior
to organizing the hedge fund he was hired by MG Financial Group to help
run their flagship news and analysis department,
Forexnews.com. After four
years as a senior currency strategist he went on to found
FxMoneyTrends.com – a research firm catering to professional traders.
Jes
Black’s opinions are often featured in the Wall Street Journal, Barrons,
Financial Times and Reuters. He has also written numerous strategy pieces
for Futures magazine and regularly attends industry conferences to speak
about the currency markets.