Everyone says QE3 will kill the dollar but PowerShares DB US Dollar Index Bullish Fund (NYSEArca: UUP) has in fact traded higher since the Federal Reserve announced its third round of quantitative easing on Sept 13.
Is this a case of short the rumor and cover the news?
The dollar ETF has been trying to form a rising channel the past two weeks after bottoming out on Sept. 14. UUP tracks the performance of the U.S. dollar versus a basket of currencies.
Everyone seems to hate the dollar now, so it could be due for a bounce.
For example, when the dollar was topping in July, bullish sentiment stood at an elevated 82%, according to Kimble Charting Solutions. The greenback’s recent decline has resulted in dollar bulls falling to the 32% level. [Is the Dollar ETF ‘Going to Hell’ After QE3?]
From a technical perspective, the dollar has bounced recently at a support trendline.
UUP rose fractionally on Tuesday while in stocks, the Dow shed about 100 points.
The dollar turned higher Tuesday after Charles Plosser, president of the Philadelphia Federal Reserve, said QE3 may not be effective, MarketWatch reports.
The dollar and U.S. stocks have tended to move in opposite directions in the aftermath of the financial crisis. A falling dollar has generally been good for stocks, and vice versa.
U.S. Dollar Index
