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  1. Home
  2. / Markets
  3. / Currencies

The Dollar Doesn't Matter to Most Traders Until It Does… and It Matters Now

That's why I have my eyes on a bullish dollar ETF in hopes of spotting a bearish reversal.
By BOB BYRNE Sep 27, 2022 | 07:41 AM EDT
Stocks quotes in this article: UUP, QQQ

Monday wasn't a pretty day for the bulls, but given the weakness in bonds and strength in the dollar, I would have expected equities to be hit much harder. With the parabolic behavior of the Invesco DB US Dollar Index Bullish Fund (UUP) , it isn't a stretch to say that most traders are keeping at least one eye on it in the hopes of spotting a bearish reversal. In the view of many, such a reversal would lead to a rebound in stocks and bonds. Whether such a bearish reversal in the dollar would trigger a sustained rally in stocks is anyone's guess. But for the traders like me, I'll worry about tomorrow after seeing how prices close today.

Remember, the fact that the UUP is gaining ground is the problem. It's the rate of change that has traders concerned. As with most aspects of trading, things such as bonds and the dollar don't matter until they do. And right now, with the dollar moving the way it is, you can bet it's garnering more attention among non-currency traders than usual.

Coming into Monday's session, I planned to establish long positions in several ETFs. But thanks to the Invesco QQQ Trust (QQQ) cracking beneath the session's volume-weighted average price (VWAP) shortly before 11 a.m. ET, I never had the chance to put my plan into motion. Like most traders, I was looking for an opening flush beneath last Friday's lows, but that obviously never occurred.

While I'm still interested in establishing a long position in the QQQ and a few additional ETFs, I'd like to see prices trade under Friday's lows first. If supply is cut off beneath $272 on the QQQ and prices quickly rebound, we will have established a level to measure our risk and trade against.

Barring a situation where supply is cut off beneath last Friday's low, the safest play is to trade against the day session's VWAP until a better setup takes hold and price breaks above the 21-day exponential moving average (EMA). The unfortunate truth is this isn't a pretty market. And there's no denying the volatility we've seen in the currency and bond markets has everyone walking on eggshells.

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At the time of publication, Byrne had no positions in the stocks mentioned.

TAGS: ETFs | Currencies | Index Funds | Markets | Technical Analysis | Trading | Real Money

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A Weak and Sluggish Dollar Is Good News for the S&P 500 and Commodities

Carley Garner
May 8, 2023 3:38 PM EDT

If the dollar index melts through support, the path of least resistance for most U.S.-denominated assets will be higher.

Asian Stocks Drop But Currencies Gain Ahead of Fed

Alex Frew McMillan
May 3, 2023 8:30 AM EDT

With trading disrupted by Golden Weeks in China and Japan, investors have cast their gaze to Washington, sending Asian currencies higher and stocks down.

While Stocks Spin Their Wheels, Bonds and Buck Move

Helene Meisler
May 2, 2023 6:00 AM EDT

Let's look at the overbought condition, bonds, and the dollar vs. the yen.

What's Really Going to Light a Fire Under This Market?

Peter Tchir
Apr 24, 2023 11:34 AM EDT

There's a lot to think about between T-bills, the debt ceiling, 0DTE VIX, geopolitical risks, the demise of the dollar and earnings, but are any worthy of a 'rant'?

This Commodities ETF Is Showing Sweet Upside Potential

Bruce Kamich
Apr 13, 2023 2:44 PM EDT

Sugar is just one of the commodities powering the index tracking fund higher.

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