Traders, despite all the jawboning ahead of The Fed announcement and the dollar bears coming out in force noting that last week's sell-off was proof that the bulls had no legs, the Dollar Index (DXC) rallied hard.
The fact is, it was no mystery that this was the likely outcome. I have made it clear this week that the move off the October 3rd lows was nothing more than a correction. Granted it was complex but that just added to the conviction that it was not the start of a sustained move lower.
It might be a bit late to chase this initial leg higher, but using pull-backs to establish trades makes a lot of sense.
So what pairs are best suited to trade?
As noted earlier, prior to the Fed announcement USD/SGD (long) and GBP/USD (short) were the pairs most likely to respond well to a resumption in the Dollar Index (DXC) rally. I still feel those pairs are worth monitoring.
But if we use today's low in DXC as the reference point, shorts in NZD/USD & USD/NOK are the outperformers, while EUR/USD, GBP/USD, USD/CHF and USD/JPY are moving in lock step with DXC.
My only ongoing issue with shorts in NZD and AUD is the negative carry - but maybe I am too hung up on that.
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