What I am Watching Today: The US Dollar and the Department of Justice

US Dollar Index

The US Dollar Index on the 1-hour chart is starting to approach an area that I think could offer support. There are a lot of things going on at the moment, not the least of which is the announcement that the Department of Justice is investigating Chairman Powell from the Federal Reserve. With political risk, a lot of the time you will see a currency slide, and that is what has happened today. However, these types of headlines tend to cause a reaction before anybody thinks. I am waiting to see if 98.50 holds as support. If it does, then I am willing to start looking at the US dollar to the long side against multiple currencies, most specifically the Euro and the British Pound, if they do in fact show signs of exhaustion.

Gold

The gold market, of course, has taken off, and gold is going higher for a multitude of reasons. It is not just this; it is a lot of things. Short term, I think you are looking at the $4,600 area, or maybe just below it, maybe $4,590 as a potential buying opportunity on dips. This 1-hour chart shows a clean breakout. I would like to see a retest and then a bounce. So, I want to see it test somewhere around $4,590, maybe 95, bounce, and then buy it on the way back up. That way, I know that people are trying to support it. If we get that, I think that is a pretty clean setup.

EUR/USD

You can see that we are, in fact, consolidating after a pretty big run higher. So, using the DXY, I might use that as my signal here to start shorting. If we can hold 98.50 over there, then I think the Euro continues to drop towards the 200-day EMA on the daily chart. In the short term, it could drift a little bit higher, and therefore, patience will be key here.

GBP/USD

The British Pound, of course, is continuing to struggle with the 1.35 level. While I am not necessarily bearish on the Pound as a currency on the whole, I do think it is going to struggle against the US dollar. Eventually, we might get a little bit more risk off, and if that is the case, that helps the greenback. I am watching this 1.35 area in the British Pound very carefully. If we reach that area and form a long wick, I am shorting it. Not with a massive position; I think this is more or less a range-bound opportunity for maybe 80 pips, but it is the setup that we are seeing.

Remember, January is typically a very choppy time of year, and that of course comes into play in everything, not just the currency markets.

Natural Gas

The other thing I am watching is the natural gas market. This is one that I think could give us an opportunity. I don’t think this fires off today, but I am watching the $3.50 level. If we can break that, I am going to get long, and I am going to be aiming for a fill of the gap back on the late part of December, maybe even $4.30 for a huge move. But this is the time of year when you expect to see that. Anything below $3.00 would be pretty disastrous, I believe.

NASDAQ 100

Finally, I think the Nasdaq 100 is likely to be a market that could attract a lot of attention. It is very choppy at the moment. Anything in the 25,250 level I look at as value. The key metrics haven’t changed despite this headline, and also, I think the jobs number last week being just a little bit soft ups the ante for quantitative easing. I don’t necessarily think that we are going to have explosive moves. I believe this is somewhat the same situation that we have in all of these other markets. Things tend to compress in early January.

So think small ball here, think small moves. Big moves will come, generally speaking, at the end of the month. A lot of money managers right now are still trying to get their positions on for their portfolio going into the year. I am generally bullish of stocks, I am generally bullish of indices, I am definitely bullish of metals, me and everybody else, and I think the US dollar has a part to play in this. I think the US dollar will strengthen. So again, watch that 98.50 level in the DXY.

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