Saturday, November 5, 2016

Dollar Index Trade for November 2016 (maybe longer)

Despite (or because of) the uncertainty, and on some levels, unease that hangs over global financial markets and in particular the US financial market at the moment, the Dollar Index fundamentally is a buy. Factoring in the relative glide path of monetary policy in the US versus those of other developed economies, interest rate parity theory suggests further dollar appreciation. Or, if the news narrative further perpetuates the market uncertainty, investors will seek out the relative safety of the US dollar and US dollar denominated assets. Either way, the sell-offs in the dollar can be used to get better price positioning, though increases should be marginal as the price momentum is currently short.

Buy US dollar exposure at current levels through futures contracts on the index, or through futures and spot contracts on exchange rates of major financial trading partners of the United States. The profit target for the trade is an index level of 100.