The PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP), the tracking exchange traded fund for the U.S. Dollar Index, is already down more than 5% year-to-date, making it a dud among major currency ETFs.
However, the dollar and UUP could see more downside as bearish technical conditions persist. As things stand, UUP already resides more than 2% below its 50- and 200-day moving averages and is nearly 7% below its 52-week high.
UUP 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. Other currencies, including the Australian dollar, yen and Canadian dollar have recently been gaining momentum against the greenback.
“A currency ‘shift’ here would have short- to intermediate-term consequences for various assets across investors portfolios. So investors need to stay tuned. This could also usher in some volatility, as traders look to re-align their currency hedges and interests,” reports ETF Daily News.
Heading into 2017, many bond market participants were betting the Fed would raise interest rates three times, but some market commentators believe two is the appropriate number of rate hikes this year. The Fed boosted rates in March for the first time this year and the third time in 15 months, but a dovish tone following the March meeting muted the dollar’s reaction.
The U.S. dollar moved sharply higher against the world’s major currencies in 2014 and 2015 — creating a strong dollar environment in the truest sense of the term. US investors experienced the results of a stronger dollar in the form of tepid economic and profit growth, and muted inflation.
Despite persistent media headlines to the contrary, the currency backdrop has been more nuanced since early 2016. Indeed, the U.S. dollar, as measured by the Bloomberg Dollar Index, traded in negative territory from mid-February through mid-November 2016, not reaching positive territory until after the November US elections.
The “US Dollar hit dual resistance at the same time that the Euro hit dual support. And currently the Dollar is attempting to break a key rising support trend line. This comes at the same time that the Euro is attempting to breakout over key downtrend price resistance,” according to ETF Daily News.
For more information on the USD, visit our U.S. dollar category.