Bitcoin dominates headlines on currency moves, yet the Federal Reserve now drives the dollar lower. At the June meeting the Federal Open Market Committee stated that it will cut the federal funds rate to counter softer growth and inflation that refuses to rise. Futures contracts price a 50-basis-point reduction by December 2019 and a further 40 basis points during 2020. The CME FedWatch tool assigns a 78.1 % probability to a 25-basis-point cut on 31 July.
Investors who want short dollar exposure without a foreign exchange account have three liquid exchange traded funds. The Invesco DB US Dollar Index Bearish Fund trades under ticker UDN. The fund holds short positions in futures that replicate the Deutsche Bank Short U.S. Dollar Index. The index rises when the dollar weakens against the euro, yen, pound, Canadian dollar, Swedish krona along with Swiss franc.
UDN printed a lower price low on 31 May. The relative strength index posted a shallower low – creating a bullish divergence. Buyers stepped in at the June 20 gap at $20.60. A measured move target projects a rally to the September 2018 swing high at $21.55. Risk-tolerant traders enter at current levels, place a stop beneath the June 21 low at $20.50, and exit half the position at $21.55.
The Invesco CurrencyShares Euro Currency Trust, ticker FXE, tracks the euro against the dollar. The fund holds physical euros in a London bank account. Each share represents a claim on approximately one hundred euros. FXE advanced 1.58 % from 30 May to 27 June.
FXE broke above a two year downtrend line and the 50-day simple moving average on 7 June. Price then retraced to the breakout zone at $107.30. A bullish hammer candle formed on 19 June. Momentum traders add on a close above $108.50 with a stop under the 50-day SMA at $107.10.
The Invesco CurrencyShares Canadian Dollar Trust, ticker FXC, offers exposure to the Canadian dollar. The fund stores Canadian-dollar cash deposits in Toronto-Dominion Bank. Each share equals roughly one hundred Canadian dollars. The expense ratio stands at 0.40 %. Assets under management total $118.64 million. The fund distributes a 0.66 % yield. FXC rose 1.99 % in the month ended 27 June and 3.96 % year to date.
FXC spiked in January – drifted sideways until early June. On 7 June the price gapped above the 200-day simple moving average and a downtrend line that began in January 2018. The next resistance sits at the October 2018 swing high of $76.75. Traders who entered on the breakout trail a stop under the 200-day SMA at $74.50. They sell half the position at $76.75 and the balance near the 2018 peak at $79.85.
