US Dollar Index, USD/ZAR, USD/CHF and Bitcoin All in Focus Today

US Dollar Index

The first chart I have in front of you is the US Dollar Index, and there is a specific reason for that: there is the “sell America trade” that a lot of traders are paying attention to. Now, what I would say is that it is true to a point, but I would focus on the reality of what is going on, as opposed to what is happening on social media, where I have seen a lot of posts about the death of the US Dollar.

The US Dollar Index looks pretty bearish at the moment, and it is possibly going to test support from a couple of times earlier this year, but it is still very much in a range. When you zoom out and look at it from a longer-term perspective, you can see we are right in the middle of the same range that we have been in since 2018.

You can even make an argument that we are at the top of a four-year range that we had previously been in. So even if we were to break down from here, you are probably looking worst-case scenario 90 on the dollar index. That will offer a lot of opportunities, but I just wanted to put everything in perspective. We are in the same range we have been in for most of the last year. We are just getting to the bottom of it. Things are getting interesting, but the world isn’t over for the greenback quite yet.

USD/ZAR

I look at exotics through the prism of the carry trade, and one of my favorites recently has been the US dollar against the South African rand. We have, in fact, gapped lower and then bounced and then started to give that bounce back a bit. I like that. That’s a good sign that we’re going to continue to go lower and we will continue to collect the swap.

When you look at the daily chart, it doesn’t take a lot of imagination for the US dollar to perhaps go looking to the 15.75 level, maybe even the 15.18 level. I do think there’s further gas in the tank for the carry trade here, and that was the case before the “sell America trade” really kind of started capturing the social media headlines. Remember, things like that tend to become a big deal once they’re obvious. The real money is made before, but in this sense, you are doing the carry trade, which is also something that people will watch as well.

USD/CHF

I will take a look at one of the majors, though, and that’s the dollar against the Swiss franc. For some time, I’ve been buying the dip and collecting swap, and it finally got blown out on Friday. That’s fine. It doesn’t matter. At the end of the day, though, what does matter is that sooner or later, the Swiss are going to lose their sense of humor about the strengthening Swiss franc. It may not be the dollar to kick off intervention, but there is a very real world in which if the Euro starts to fall against the Swiss franc, then you will see intervention.

I’m not necessarily looking to buy this yet, but I am trying to see whether or not there’s any pushback because we’re at the bottom of this cluster here back in 2011. If you remember, if you’ve been around long enough, that was when we had the Swiss bank breaking of the peg a few years later, but on the way down we had formed this hard bounce. I think this is an area that the Swiss will be watching.

They are known to intervene and of course, there is talk that the United States and Japan intervened on behalf of the yen on Friday. So we may see something like that as well in an attempt to stabilize currencies here. I don’t know if it sets up a trade yet, but if we were to take out the Friday candlestick, I think that would be an extraordinarily strong sign.

Bitcoin

Finally, I like the idea of buying Bitcoin in this general vicinity. I am looking at the $84,000 level as a major support area so we’ll have to watch. I do recognize that there is a lot of risk-off behavior out there, but quite frankly, I don’t think that matters at the moment. Bitcoin is kind of in its own world. There are questions about central banks loosening monetary policy that should, in theory, be good for Bitcoin, but really, at this point in time, I think this is just a nice technical setup, perhaps for a bounce to the 50-day EMA. All we need is a little bit of risk-on type of behavior. If we can get that, then I think Bitcoin is probably going to be a winner here.

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