Catching the surprising upside in the Dollar...
NOBODY'S been talking about it, writes Steve Sjuggerud at DailyWealth.
But I think we're seeing a potentially major tidal shift for the US Dollar that will take us through the rest of this year, at least.
Since January, the US Dollar had been in a downtrend. People got used to it. Nobody cared.
But over the last month, a tidal change has happened...The Dollar stopped its plunge...and started going up.
Over the long run, I expect the US Dollar won't be a great-performing currency. But in the short run, I think the Dollar has some upside – so much so that I put a trade on in my True Wealth newsletter to capitalize on the opportunity.
The chart here shows it clearly. The US Dollar Index had been falling since January. But then, about a month ago, it reversed course. Take a look:
So why did the Dollar bottom last month and start to go higher?
The experts will give you all kinds of reasons (and some of those reasons will contradict each other).
But the real reason the Dollar bottomed and started to rise is simple...
By September, everyone who wanted to sell the Dollar had already sold.
I don't trade currencies very often in my True Wealth newsletter. But I did this time. The situation in the Dollar was becoming too extreme NOT to trade it.
So how do you bet on a rising US Dollar? The simplest way, believe it or not, is to bet on a falling Euro.
In September, when the Dollar reached a hated extreme, the Euro reached a point where it was more "loved" than it had been in a decade.
You can view sentiment extremes like this by looking at the Commitment of Traders (COT) report. The COT report tells us what futures traders are doing with real money. And it's one of our favorite contrarian tools...
When futures traders all bet on the same outcome, they tend to get it wrong. So if they're all bearish...or if they're all piling into a trade...I like to do the opposite. And futures traders LOVE the Euro today.
Take a look to see what I mean:
The last two times Euro speculators were as optimistic as they were in September were in 2011 and in 2013. In those cases, the Euro fell 17% and 21% over the next year and a half.
Those are actually big moves in a short period of time for a currency – but they're not exciting-enough gains to compete with stock market returns.
So in my newsletter, I showed readers how to dramatically amplify those gains if we're right – without taking on too much risk.
I told my subscribers I believe a move just as big as those moves in 2011 and 2013 – if not bigger – could happen this time around.
The Dollar and the Euro are in a unique situation right now. I think it's time to take advantage of this opportunity.