A1 Trading

Time to Short the Dollar?

March 28, 2024
Frank Cabibi

After today's GDP numbers coming in higher than expected in the US, indices and commodities are rising while the dollar sinks. Stronger economic numbers are usually bullish for a countries currency, but here is why it could be time to short the dollar.

EdgeFinder Analysis

USOil is still worth talking about especially after its score increased to +9, a very bullish score on the EdgeFinder. What moved today's score was retail as they are now mixed sentiment instead of being majority long oil. The less retail percentage is involved in the long side, the more optimistic it looks to the EdgeFinder.

Today's GDP numbers were a healthy sign for the commodity because it may indicate an increase in demand for oil production and consumption. The price of oil tends to rise on strong economic numbers and rising inflation. Knowing that the Fed still plans to cut rates, rising inflation is not really a hawkish concern for oil for now.

Gold is up again today for the 4th straight trading session. Price is coming up to test the all time highs once again around $2,222. It is a little surprising that the metal came up after stronger GDP numbers, but there is a deeper reason for gold to be in demand over the dollar.

This has to do with the Fed. Similar to oil, gold will likely continue to find upside on economic news that hurts the dollar. Stronger GDP means the Fed is not concerned about the high interest rate environment affecting the economy and will even look to cut rates at some point this year. If it's bearish news for the dollar, then it's a bullish sign for gold right now.

The US30 (Dow Jones) remains in bullish territory despite the overextended zones it reached. Recent GDP numbers are going to help out this index to the bullish side in the EdgeFinder's perspective. Seeing how yields are stagnant this week and the dollar is weaker today suggests that GDP has in good shape.

Price is up around 0.78% this week as we approach PCE reports tomorrow. What the index would most likely want to see is a lower PCE number. Although, either way it doesn't seem like it will impact the market too much.

Retail Spotlight

Retail is still short indices, mixed dollar pairs, mixed oil, long crypto and long metals. Nothing much has changed from earlier in the week.

Smart Money Spotlight

Gold's sentiment is very clearly bullish after seeing the latest COT vs retail chart. As the crowd gets increasingly short, COT is buying up the metal. This is a sign for higher returns to come until sentiment changes.

Fundamental Spotlight

The YTD number today shows more growth than what we've seen in the same quarter last year. Output is slowly rising despite the monetary environment and is showing more growth than last year's numbers.

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