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Capitalizing on the Surprising Upside in the U.S. Dollar

By Dr. Steve Sjuggerud
Monday, October 9, 2017

"The dollar jumped to more than two-month highs against the yen and seven-week highs against the euro on Friday," Reuters news service reported on Thursday.
 
Nobody's been talking about it. But I think we're seeing a potentially major tidal shift for the U.S. dollar that will take us through the rest of this year, at least.
 
Since January, the U.S. dollar had been in a downtrend. People got used to it. Nobody cared.
 
But over the last month, a tidal change has happened... The dollar stopped its plunge... and started going up.
 
Over the long run, I expect the U.S. dollar won't be a great-performing currency. But in the short run, I think the dollar has some upside – so much so that I put a trade on in my True Wealth newsletter to capitalize on the opportunity.
 
Let me explain...
 
The chart here shows it clearly...
 
The U.S. Dollar Index had been falling since January. But then, about a month ago, it reversed course. Take a look:
 

So why did the dollar bottom last month and start to go higher?
 
The experts will give you all kinds of reasons (and some of those reasons will contradict each other).
 
But the real reason the dollar bottomed and started to rise is simple...
 
By September, everyone who wanted to sell the dollar had already sold.
 
I don't trade currencies very often in my True Wealth newsletter. But I did this time. The situation in the dollar was becoming too extreme NOT to trade it.
 
So how do you bet on a rising U.S. dollar? The simplest way, believe it or not, is to bet on a falling euro.
 
In September, when the dollar reached a hated extreme, the euro reached a point where it was more "loved" than it had been in a decade.
 
You can view sentiment extremes like this by looking at the Commitment of Traders (COT) report. The COT report tells us what futures traders are doing with real money. And it's one of our favorite contrarian tools...
 
When futures traders all bet on the same outcome, they tend to get it wrong. So if they're all bearish... or if they're all piling into a trade... I like to do the opposite. And futures traders LOVE the euro today.
 
Take a look to see what I mean:
 

The last two times euro speculators were as optimistic as they were in September were in 2011 and in 2013. In those cases, the euro fell 17% and 21% over the next year and a half.
 
Those are actually big moves in a short period of time for a currency – but they're not exciting-enough gains to compete with stock market returns.
 
So in my newsletter, I showed readers how to dramatically amplify those gains if we're right – without taking on too much risk.
 
I told my subscribers I believe a move just as big as those moves in 2011 and 2013 – if not bigger – could happen this time around.
 
So how can you get into this trade – with even more potential upside? Through the ProShares UltraShort Euro Fund (EUO).
 
EUO is a "double inverse" fund. For every 1% daily fall in the euro, EUO goes up by 2%, and vice versa.
 
As you might guess, EUO delivered outstanding returns after 2011 and 2013 – the last two times euro speculators were this optimistic. The fund earned 32% and 53%, respectively, over the next year and a half. Those are incredible gains in a currency.
 
The dollar and the euro are in a unique situation right now. I think the simplest way to take advantage of this opportunity for big returns is through EUO. Check it out...
 
Good investing,
 
Steve




Further Reading:

"The Canadian dollar just hit its 'most loved' level since 2013," Brett writes. History shows this could be a bad sign for the currency over the next year or so... Read more here: It's Time to Bet Against the Canadian Dollar.
 
Another form of currency is extremely loved today... But it might not be the kind you're used to. In this essay, Steve warns readers about a possible mania in bitcoin. Learn more here: Bitcoin Investors Are in a Frenzy – Proceed With Caution.

Market Notes


NEW HIGHS OF NOTE LAST WEEK
 
Bank of America (BAC)... "Big Four" bank
JPMorgan Chase (JPM)... "Big Four" bank
Citigroup (C)... "Big Four" bank
Paychex (PAYX)... payroll processor
TD Ameritrade (AMTD)... online brokerage
eBay (EBAY)... Internet auctions
Intel (INTC)... semiconductors
Biogen (BIIB)... biotech
Bristol-Myers Squibb (BMY)... Big Pharma
Eli Lilly (LLY)... Big Pharma
Pfizer (PFE)... Big Pharma
Cigna (CI)... health insurance
Boston Scientific (BSX)... medical devices
BP (BP)... oil supermajor
Royal Dutch Shell (RDS-A)... oil supermajor
HollyFrontier (HFC)... oil refiner
Valero Energy (VLO)... oil refiner
Cummins (CMI)... diesel engines
Lockheed Martin (LMT)... "offense" contractor
Northrop Grumman (NOC)... "offense" contractor
3M (MMM)... manufacturing
D.R. Horton (DHI)... homebuilder
KB Home (KBH)... homebuilder
Home Depot (HD)... home improvement
Sherwin-Williams (SHW)... paint
Waste Management (WM)... trash and recycling
Blue Buffalo Pet Products (BUFF)... pet food

NEW LOWS OF NOTE LAST WEEK
 
Rite Aid (RAD)... drugstores
Kroger (KR)... grocery stores
Kraft Heinz (KHC)... Big Food
Papa John's International (PZZA)... pizza
Navient (NAVI)... student loans

premium teaser

Double-digit upside potential in this hated commodity...
 
Whenever I see record levels of "hate" in a commodity, I get interested. Especially when it's a commodity that will never go out of style...
 

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