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USD Index Opens FED-Week On The Bull

It has been an active open to FED week, featuring drone strikes in the Middle East and a trend reversal in U.S. Treasuries. The USD Index has been a surprise beneficiary of the action. Significant gains vs the EUR, Swiss franc, and pound Sterling have highlighted the session for the Greenback.

In today’s U.S. Treasury auction, short-term government debt took a surprise turn to the bull. The past four months have brought consistently falling yields amid an institutional flight to safe-haven assets. This morning’s auctions certainly lifted some eyebrows:  

Event                                          Actual Previous

3-Month Bill Auction                1.945% 1.920%

6-Month Bill Auction                1.870% 1.825%

Given Sunday’s drone attack on Aramco oil installations and the U.S. indices posting intraday losses, an uptick in yields is a bit counterintuitive. In addition, the USD Index is attracting some bids, with December futures rallying above the 98.000 handle.

USD Index Back Above 98.000

After a tough close to last week, December USD Index futures are back on the bull. Rates are trending north of 98.000, a positive sign for the Greenback to open FED week.

December USD Index Futures (DX), Daily Chart
December USD Index Futures (DX), Daily Chart

Here are two levels to watch for the rest of the session:

  • Support(1): Daily SMA, 97.820
  • Support(2): Bollinger MP, 97.600

Bottom Line: In the event the December USD Index pulls back from current levels, a late-day long may come into play. Until the closing bell, I will have buy orders queued up from just above the Daily SMA at 97.875. With an initial stop at 97.765, this trade produces 20 ticks on a slightly sub-1:1 risk vs reward management plan.

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Shain Vernier
US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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