Why the Dollar Is Strengthening Again: My Full Forex Book
Why the Dollar Is Strengthening Again: My Full Forex Book
Bottom line: dollar strength is the path of least resistance, not a certainty
My whole macro view right now rests on one idea: the dollar index (DXY) is more likely to grind higher. Not certain — the path of least resistance is up.
The logic is simple. Recent US jobs data has come in stronger than Wall Street forecast, and economic growth has too. Manufacturing and services PMIs both beat expectations. To be clear, I'm not saying US jobs are incredibly strong — I'm saying they've been much stronger than anticipated. Currency markets trade on expectations versus reality, not absolute numbers.
On the 4-hour chart, DXY has found support near 99.8 — call it 99.75 precisely. If you're watching precious metals or any dollar pair, keep that level on your radar.
1. Dollar long (UUP) — the core position
I'm long the dollar through UUP, the bullish dollar ETF, and I'm currently sitting around $4,000 in unrealized gains. The plan is simple: as long as the path of least resistance is up, I hold.
Technically I think DXY most likely charges toward 100.5, and on a meaningful breakout I'd look for the 102 zone — the next major resistance going back over a year. If something changes, I adjust.
2. Silver short — fundamentals at -6
I'm short silver. On EdgeFinder, silver's fundamental score is -6. Today's CPI came in line with expectations, giving a neutral CPI read, but enough other metrics still point to dollar strength — which equates to silver weakness.
Silver caught a small bounce after CPI because the market was positioned for a more painful print. When it merely matched expectations, traders shrugged — 'we already knew inflation was rising' — and repriced a bit. Nothing crazy.
3. Pound/dollar (GBPUSD) short — fundamentals at -9
This is my strongest bearish read. EdgeFinder has it at -9 and it's held a solid bearish reading for a while. Technicals, jobs and inflation comparisons all favor the dollar.
It's taken its sweet time, though. So I've already taken profit on half the position, and I'm looking for the second half to run to 1.32 — or it stops me out if we break back above the 61.8% retracement. Even if it stops out, the first-half profit keeps the whole trade slightly green.
4. Euro/dollar (EURUSD) short candidate — fundamentals at -7
Euro-dollar recently printed a strong bearish -7. Most macro metrics favor the dollar over the euro. On the chart, a major support has broken down, and the current retracement looks weak. I'd rather short into that rally if we get it.
5. Dollar/yen (USDJPY) long setup — fundamentals at +6
On the buy side I like dollar/yen. Above 160 I'm looking for a momentum long — a pullback after a potential breakout. EdgeFinder scores it +6, which I like quite a bit.
My book at a glance
| Asset | Direction | Fundamental score | Status |
|---|---|---|---|
| DXY (UUP) | Long | Bullish | Holding, +$4,000 unrealized |
| Silver | Short | -6 | Holding |
| GBPUSD | Short | -9 | Half banked, half held |
| EURUSD | Short | -7 | Waiting to short a bounce |
| USDJPY | Long | +6 | Waiting for 160 break |
What I'm most wary of
Everything here assumes the dollar keeps strengthening. But FX never moves on one variable. A tool like EdgeFinder is a confluence tool — it blends many factors. Macro matters, but so do technicals and institutional sentiment.
The longer the Middle East conflict drags on, the more obvious the inflation challenge becomes, and the more volatility it injects into both the dollar and precious metals. I hold no gold shorts — only silver. Gold is still a strong downtrend and could see a reasonable bounce, but I'm not interested in going long it. When direction isn't clear, sitting out is also a strategy.
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