Long the Dollar: Why I'm Waiting for a 99.4 Breakout

I'm currently long the dollar

Let me start with the position: I'm betting on dollar strength right now, and I'm waiting for the DXY to break above the 99.4–99.5 zone.

I've expressed it through UUP, a dollar-bullish ETF. I'm up roughly $1,261 on it at the moment — honestly a welcome bounce-back after the loss I took on gold a few days ago. Whether this turns into a larger runner is something I'll have to watch.

What the chart is saying: 99.5 is the line

On the 4-hour, the DXY is back inside the range we've been talking about for a while.

We had a fakeout from Thursday into Friday — the dollar bulls looked like they were losing support, but to their credit they rallied back quickly, closed decisively, and pushed toward the top of the range again. I'll admit I was a little early to my bullish idea. But the technical breakout we've been waiting for still has a standing chance.

The trigger I care about is clean: a close above 99.5. Break that, zoom out to the daily, and I think there's room to squeeze up toward 100.5. That's the top of the range — but personally I think there may be more upside than that.

Why the dollar, why now

Two things pushed the dollar today: fundamentals and geopolitics.

First, manufacturing PMI beat. It came in at 54 versus 53.3 expected — a +0.7 positive surprise. PMI is a forward-looking read on the manufacturing economy, and it just printed its highest level in many months. A stronger growth outlook is straightforwardly bullish for the dollar, and that logic played out cleanly.

Second, the Middle East. Iran reportedly halted message exchanges with the US over the Israel situation, with talk of completely blocking the Strait of Hormuz and activating other fronts including the Bab el-Mandeb Strait. Geopolitical stress pulls capital into the dollar as a safe haven.

How I expressed it: short sterling

Beyond the ETF, I'm also expressing the dollar long by shorting the British pound against the dollar.

This short has been on since roughly May 20 — over two weeks now with almost no adjustment. It went against me, then for me, back to breakeven, and at the time of writing it's very slightly in profit.

The management rule is simple. If sterling resolves to the upside and breaks the 61.8% retracement, I'm out — no question. The dollar long comes off and the pound-dollar short comes off together. If it pushes lower instead, my first target is 1.33, and on a larger move I'm looking toward 1.3180.

The signals I'm watching alongside it

Yields are structurally higher and flashing some concern. If higher oil feeds inflation, the market starts pricing the idea that the Fed may need to hike — and that shows up in yields. The 2-year jumped the most, and Japan's 10- and 2-year yields are moving higher too, with bonds selling off there.

My bias is not to believe a move until price proves it. That's why I want an actual close above 99.5 before I get more confident. Sitting right at major daily resistance, this is the kind of spot where a break opens a clean shot to 100.5.

FAQ

Q: What's the exact trigger for the dollar long? A: A close above 99.5 on the DXY. Confirm that and I view 100.5 as the first target on the daily.

Q: When do you cut the sterling short? A: The moment the pound breaks the 61.8% retracement to the upside. To the downside I'm targeting 1.33, then 1.3180.