U.S. Dollar ETF Continues Surging

The PowerShares DB US Dollar Index Bullish Fund (NYSEARCA: UUP) surged more than 2% in April and started May off on a strong note, prompting some technical analysts to opine that more gains are ahead for the once moribund U.S. currency.

With the Federal Reserve looking to hike interest rates and the U.S. economy continuing to strengthen, the U.S. dollar’s recent decline could be quickly pared and even push higher, potentially weakening foreign equity returns once currency fluctuations are taken into account. The Fed has already boosted borrowing costs once this year and some market observers believe that number could reach four by the end of the year.

“As of Friday’s close at $24.03, the exchange-traded fund (ETF) was dead-even with its 2017 year-end price — marking the first weekly settlement so far in 2018 where UUP hasn’t been negative on a year-to-date basis. (The dollar tracker has finished just four sessions above $24.03 since the start of the calendar year, including last Thursday.),” according to Schaeffer’s Investment Research.

More On UUP

UUP tracks movements against a basket of currencies including euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. UUP tracks the Deutsche Bank Long USD Currency Portfolio Index – Excess Return Index.

“From its July 9, 2013 closing high at $22.93 to its May 6, 2014 closing low at $21.16, UUP shed 7.7% of its value — and over this time frame, a few minor rally attempts were stifled by the descending 160-day moving average, similar to the slumping price action that played out following the late 2016-early 2017 highs. But after the dollar fund’s decisive gap above its 160-day on July 22, 2014, the shares went on to rally more than 23% into their March 13, 2015 closing high at $26.49,” said Schaeffer’s.

Over the past month, investors have added $33.16 million to UUP, according to issuer data.

Traders considering a bearish position on the dollar can consider the PowerShares DB US Dollar Index Bearish (NYSEArca: UDN), an inverse though not leveraged bet against the greenback.

For more information on the USD, visit our U.S. dollar category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.