One of the more interesting scenarios across the global market place is what is happening in the US Dollar, and the Euro component more specifically. Remember, the Euro represents a majority in the entire US Dollar Index. On Monday, the Euro engulfed the prior 13 trading sessions. This means that it made a new low, below the past few weeks trading, and then reversed to close at a new high, above any of the highs over the past few weeks.
This bullish engulfing day is something I take seriously, especially within the context of the current sentiment towards this market.
Last week I presented my bearish case for the U.S. Dollar (see here). It includes the most recent magazine cover for The Economist showing George Washington on the US Dollar but with a body builder’s body. Clever, but telling of the current bullish sentiment towards US Dollar.
Now this week we come to see this monster Bullish Engulfing day in $EURUSD?
Look how the US Dollar Index just made a new high, but the Euro did not make a new low. I think that divergence is telling and suggests a mean reversion in Euro. We want to be short US Dollars if we’re below 100.
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This post originally appeared on Investopedia.com on 12/6/16
Tags: $DX_F $UUP $DXY $EURUSD $6E_F $FXE