Dollar Poised To Rise

Markets never move in a straight line. There always are counter-trend moves. Most of you probably know that the U.S. dollar has been in a strong upturn for the past few years. As we entered 2016, the Fed had just raised interest rates and given many dollar bulls renewed belief that the rise would continue.

But the dollar’s rally stalled as the Fed has backed away from raising rates, commodities have rallied strongly and the dollar fell sharply these past four months. We sense a turn higher again in the dollar and are recommending an options trade on the popular rising-dollar exchange-traded fund PowerShares DB US Dollar Index Bullish Fund (UUP).

Why would the dollar rally now? Markets ebb and flow. We expect the dollar to rally short term as commodities fall and treasuries rise in a safe-haven sell-off. We don’t need a big move to make money in options, and the pricing of a call option in UUP is cheap due to the generally low volatility associated with it.

Right now, we expect UUP options to benefit from a sell-off in commodities and stocks in the days and weeks to come. The rise in the dollar would be a nice complement to this view. When you receive this alert, buy to open the UUP June $24 calls (UUP160617C00024000), which expire on June 17 and which last priced at 37 cents.