Currency ETFs To Keep An Eye On
August 29th, 2014 at 9:00am by Tom Lydon
Currency exchange traded funds are experiencing some major moves as the U.S. dollar appreciates against a basket of foreign currencies.
Specifically, the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP), which tracks the price movement of the U.S. dollar against a basket of currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, broke above its symmetrical triangle formation – a period of conslidation before the price moves above or below identified trend lines, forming a significant upward move, according to Investopedia.
The U.S. dollar has strengthened as traders anticipate the Federal Reserve will tighten its monetary policy and a better-than-expected second quarter GDP expansion bolstered the currency. [U.S. Dollar ETFs’ Moment to Shine]
The CurrencyShares Euro Currency Trust (NYSEArca: FXE), on the other hand, has been breaking down due to the stronger greenback – FXE is trading 2.9% below its 200-day exponential moving average and fell below its $133 support in early August. FXE is trading around $130.
Analysts remain negative on the euro currency, with Barclays warning of a continued sell-off, as European Central Bank president Mario Draghi hints at a loose monetary policy and stimulative measures, according to PoundSterling.
The CurrencyShares Japanese Yen Trust (NYSEArca: FXY) has been trading range bound through most of the year but has broken below its range on Aug. 22, signaling a potential long-term downtrend.
However, escalating tensions in Ukraine and uncertainty in the Middle East could support the Japanese yen as a safe-haven asset. [Currency Traders Find Safety in Yen, Franc ETFs]
Lastly, the CurrencyShares Australian Dollar Trust (NYSEArca: FXA) is still trading within a symmetrical triangle formation, so investors will have to monitor movements to see if the currency breaks out on the down or upside. Investopedia points to an upside breakout target just below $100 and a near $88 downside breakout. FXA is trading around $93.7.
Nevertheless, the Australian dollar has been holding up against other foreign currencies as a more attractive yielding alternative in light of the Bank of Japan and ECB’s dovish outlook. [More Upside for Australia ETFs]
For more information on global currencies, visit our currency ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.