This US Dollar ETF Is Seemingly Unstoppable!

| March 13, 2015 | 0 Comments

inflows/outflowsThe US Dollar Is On A Mission!

Believe it or not, the US Dollar is once again exploding to new yearly highs.  Of course, the recent rally is just an extension of the bullish move that started in July of last year.

Take a look…

US Dollar ETF, a chart of the US Dollar

As you may remember, July 2014 was when investors started betting the Federal Reserve would finally shutter their quantitative easing (QE) program.  They bet correctly, as the Fed ended QE in October 2014.

While the greenback may seem overbought, investors just received another reason to push it higher…

According to the most recent report from the Bureau of Labor Statistics, the US economy added 295,000 jobs last month.  The data came in well above market expectations and points to an increasingly healthy labor market.

As it sits now, the unemployment rate is 5.5%- the lowest since the financial crisis.

Now that investors are seeing strong employment gains in the US labor market, they’re thinking Fed Chairman Janet Yellen will start raising interest rates soon.

This US Dollar ETF Is Soaring!

Thanks to the bullish jobs development, the Powershares DB US Dollar Index Bullish Fund $UUP is surging to its highest level in years. In fact, the US Dollar ETF may hit all time highs in the very near future.

Let me show you what I mean…

US Dollar ETF, a chart of $UUP

As you can see, $UUP is on the verge of testing the record high set in late 2008, which was the height of the financial crisis.

Since we likely have a few more months until Janet Yellen finally pulls the trigger on interest rates, I’m betting $UUP will achieve new highs soon.

While all this information is good news for dollar bulls and the US economy, it’s giving bullish commodity investors the blues.

CRB Index Continues To Suffer…

Anyone watching gold, silver, and crude oil the past few months realize the dollar’s bearish effect on commodities.  Yes, there are some individual supply/demand factors at work in each of these assets as well.

But you can’t deny the surging dollar’s effect on the overall commodity space.

This chart sums it up pretty well…

US Dollar ETF, a chart of the CRB index

As you can see from this CRB Index chart, the US Dollar rally is having a very detrimental effect on hard assets.  The commodity-focused index is on the verge of breaking to new 52-week lows.

When will the pain for commodities end?

One thing’s for certain.  If the commodity space is to stabilize, the US Dollar must stop making new highs with each passing day.  And in order for bulls to return to commodities with vigor, the greenback must reverse course and turn lower.

When can we expect such a situation?

I suspect the dollar may finally start topping out once the first interest rate raise is made.  Investors will likely adopt a “buy the rumor, sell the news” mentality towards the US Dollar until that happens.

As a result, commodity bulls will have to remain patient for the foreseeable future. 

Until Next Time,

Justin Bennett

BIO:  Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com.  With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them.  Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.

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Category: Commodity Trading

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.