Measuring the USD against a basket of currencies

Unwinding of bets against the greenback have also added support, strengthening the dollar against its major trading partners. The dollar is closing in on its highest levels for the year against other major currencies, propelled by investors’ worries about global growth rather than cheer over U.S. prospects. The USD Index, which measures the greenback against the currencies of major trading partners, rose above 93 on Wednesday morning. It has only closed higher this year on the last two days in March, when it peaked at 93.3. The global economy has been accelerating out of Covid-19 restrictions, led by an American economy turbocharged by high government spending. In the first three months of this year, that led to a strong dollar rally from a low of 89.4 in early January to the March high of around 93.3.

Investors are now growing more concerned that the U.S. recovery is reaching a plateau. The Canadian dollar is a very good example of how risk aversion is growing in global asset markets. Near the start of June, one dollar bought 1.20 Canadian dollars. Now it buys C$1.27, a roughly 5.5% gain. That is a stronger run than the near 3.5% gain in the wider dollar Index. The dollar tends to strengthen either when the U.S. economy is doing much better than the rest of the world, or when the world is struggling and U.S. assets such as Treasurys become a haven. The dollar tends to weaken when many countries are growing well together.

We present our open trades on currencies and associated spots for the overnight session of August 4, 2021 including ideas for Crypto futures which appear to be in a bottoming pattern. Follow along with our trading on Twitter at Tradeguidance where most of our ideas also find a lot of interest.

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