Dollar Bulls back from slumber

7 Eyl 2020

Despite the Feds dovish policy, which is willing to accept high inflation and subsequently a weaker dollar ( not directly said but a consequence of high inflation ), The dollar has rallied. Fundamentally, this could be possible in the short term since deflationary forces are still more dominant with consumer spending still noticeably below pre-covid levels, still noticeable decline in traveling ( very strong in international travel ), and more americans focusing on increasing there savings due to concerns of potential future issues. Thus , the $ could rally in the short term despite the feds policy. If the $ rallies too much, its likely Fed Intervention will take place to introduce measures to weaken the dollar and kick start inflation again.

Bullish Dollar Scenario is valid till a break of 92.5. A break below that would indicate Dollar bears are in control and we can continue in the channel shown.

A break above 93 would indicate Dollar Bulls in control and allow for a greater move to the 94-95 area, at which a pullback could be seen as that area has strong resistance. Breaking that area however would be extremely bullish for the dollar, as it is several month resistance so quite strong.

How to play this

UUP Option Chain
Neutral: 1:1 straddle
Slightly Bullish 2:1 straddle bullish bias
Very Bullish: 3:1 straddle bullish bias