Dollar Rally Could Hurt Stocks

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PowerShares DB US Dollar Index Bullish Fund (NYSE: UUP ) - This exchange-traded fund (ETF) seeks to track the price and yield performance, before fees and expenses, of the Deutsche Bank Long US Dollar Futures Index. The index is comprised solely of long futures contracts, and the futures contract is designed to replicate the performance of being long the U.S. dollar against the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc.

Along with a number of technical indications that the market is overbought , the recent action in the dollar should give investors pause.

Mark Arbeter of Standard & Poor's notes that while it is likely that the current rally has further to go, "we believe the probability of a pullback is rising. One of the main catalysts for strength of the markets of late has been the consistent downtrend in the U.S. Dollar Index. We think a counter-trend rally in the dollar is approaching and believe this will take away some fuel from the rally."

UUP's chart is presented in order to illustrate the oversold condition of the dollar and the possibility of a rally that could have negative significance to the current advance in stocks.

Trade of the Day - UUP Chart

Trade of the Day Chart Key

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: ETF , UUP

Sam Collins

Sam Collins

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