The S&P futures 500 (ESZ19: CME) closed at 3066.91 Friday, 16 points above its opening print of 3050.72, which was also its low of the day. It closed at the top of its trading range (3050.72 – 3066.95), after settling at 3037.56 on Thursday. That’s a pretty strong close in my book, but again, sleep through the overnight session and you miss almost half of the day’s increase.

The Effect of the Dollar

Last Friday, I talked about the Dollar’s effect on the price of other commodities, the ES included (https://mrtopstep.com/its-the-dollars-fault/). Macroeconomists will tell you the Dollar needs to decrease in price for the markets to continue higher.  That’s happening, and it’s happening across the board. The Dollar is starting to look a little weak here.

After spiking post the Fed saying “that’s it,” the Dollar has continued to trade lower. We’ve been short for a while, a long while, if you go back a few years when the Dollar peaked above 100. With that in mind, it’s Dollar time.

The Dollar Index (DX-Y.NYB) is a weighted basket of currencies that trade against the dollar. The Euro (6E=F) comprises a little less than half of the index with the Pound (6B=F), the Aussie (ANE=F), the Canadian Dollar (CDZ19.CME) and others making up the rest. 

Sounds to me like should keep an eye out for the Euro. We think that time is now. Take a look at the Dollar chart. To me, it looks like it has topped, and is holding a support area that just might not prove to be so supportive. I could go on here, but since the Euro is so important let’s go there, but remember, all of the foreign currencies are rallying against the Dollar. Keep your eyes open; this could just continue.

British Pound chart courtesy of AMS Trading Group

Currency Classes

There are two classes of currencies that trade against the Dollar. The Euro and the Pound are in a class I call the “Big Boys”.  Note, the Japanese Yen is in this class as well, but since I don’t follow the Yen you’re not going to see many charts on it.

The Big Boys turned about a month ago. The Pound more rapidly than the Euro, call it the Brexit Blast. We didn’t miss the Pound’s move; we’re long 6B 12-19 @ 1.2345, just loved the number. We’ve been buyers of the Euro (6E 12-19) with an average entry price of 1.1050, and we’re still adding. Again, both of the Big Boys are trending higher. My question is, how high can they go?

Australian Dollar chart courtesy of AMS Trading Group
Canadian Dollar chart courtesy of AMS Trading Group

If you have the Big Boys, then you need to have the “Little Sisters”, smaller currencies like the Australian Dollar (6A 12-19) and the Canadian Dollar (6C 12-19). Don’t underestimate the Little Sisters, the Aussie and the Loonie are tied to natural resources. You can use these currencies to hedge against, or play for, moves in the underlying commodities.

Coffee

A couple weeks ago we suggested buying Coffee (KCZ19.NYB). The reasoning tied to the fact that the Brazilian Real reacts stronger than any currencies with issues related to the China / U.S trade negotiations. Coffee is up about 10% since positive news emerged on the trade deal. There’s lots of ways to trade these instruments. Stay tuned, we’re going to start doing some live transmissions on these and other subjects.

Nat Gas Update

No real change in our NG position.

Read: https://mrtopstep.com/its-the-dollars-fault/

Me and Leo, my Chinese Bengal cat hit the road today. Keep emailing me at david@amstrdinggroup.com and let me know what you want to hear about.  Thanks for reading what we post. Going to do our best to stay current and write these words, but if not, you’re in good shape with Danny. Enjoy your trading!


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As always, please use protective buy and sell stops when trading futures and options.

Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Any decision to purchase or sell as a result of the opinions expressed in the forum will be the full responsibility of the person(s) authorizing such transaction(s). BE ADVISED TO ALWAYS USE PROTECTIVE STOP LOSSES AND ALLOW FOR SLIPPAGE TO MANAGE YOUR TRADE(S) AS AN INVESTOR COULD LOSE ALL OR MORE THAN THEIR INITIAL INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.

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