We have been watching the US Dollar with special interest recently, particularly versus Europe, due to its inverse relationship with the US stock market over the past year.
The following charts and text (green highlights) are an excerpt from our February 19th Keys To This Week report (access requires subscription), which pointed out an emerging chart pattern in a US Dollar-related ETF that carried positive near term implications for the US currency. That ETF met its initial measuring objective this morning.
Keys To This Week, one of 8 different reports that we produce for subscribers throughout the month, is a detailed weekly outline of key market factors and corresponding charts pertaining to the US stock market and market sectors, US interest rates, and the US Dollar, that are most likely to influence US financial market direction during the upcoming week.
Excerpt from Keys To This Week, February 18th 2013
Chart Patterns: PowerShares DB US Dollar Index Bearish (UDN).
NEAR TO INTERMEDIATE TERM DOLLAR BULLISH.
Chart 9 below plots UDN daily since April 2012 and highlights a chart pattern, a triangle, which the ETF broke down from as of the end of last week.
Note: UDN seeks to track the price and yield performance, before fees and expenses, of the Deutsche Bank Short US Dollar Futures Index. The index is comprised solely of short futures contracts. The futures contract is designed to replicate the performance of being short the US Dollar against the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.
This recent breakdown targets an initial 2% decline to 26.30 for this inverse US Dollar fund, which we view as being near term positive for the US currency primarily versus Europe.
<the rest of this report is available in our Research Center>
The PowerShares DB US Dollar Index Bearish ETF (UDN) met our 26.30 initial downside target this morning to capture a 2.3% decline in a little more than two weeks, as the US Dollar rose. During this same period the US Dollar Index (DX) rose by 1.94 points or 2.4%, the PowerShares DB US Dollar Bullish ETF (UUP) rose by 0.51 points or 2.3%, and Euro/US Dollar (EURUSD) declined by 3.0%.
Current intermarket relationships suggest that how the US currency fares between now and the end of the 1st Quarter will have an indirect influence over US stock market direction as US equities negotiate their 2007 benchmark highs. Our latest analysis, directional bias, and price targets for the US currency are available in our Research Center.
Interested investors can request further information about our research, including services and pricing, by clicking here and completing the on-line form or by calling us at 1-888-960-0005.