Conclusion, Investment Implications, Strategy
The Invesco DB US Dollar Index Bullish Fund (UUP) has recently risen above seven months of sideways investor indecision amid quarterly relative outperformance versus the S&P 500. This suggests an emerging buying opportunity in the US Dollar with good risk/reward characteristics.
Current Sector & Industry Group Ideas
Table 1 below is also accessible via the Sector & Industry Group Ideas rectangle at the top of the Research Center.
Click the table to make it larger
This table also regularly appears in our weekly Keys To This Week: Sector & Industry Groups report published on Monday mornings.
Analysis and Rationale
The upper panel of Chart 1 below plots the Invesco DB US Dollar Index Bullish Fund (UUP) daily since February along with its 200- and 50-day moving averages, widely-watched major and minor trend proxies. The lower panel plots the corresponding daily relative performance of UUP versus the SPDR S&P 500 ETF Trust (SPY) along with its 63-day moving average, the latter which we use to identify the Strategic (quarterly) trend of relative performance versus the stock market.
Chart 1
The green highlights in the upper panel show that UUP is in the midst of an Aug 16th breakout higher from seven months of non-trending sideways indecision, which is bordered on the upside by the 28.67 March and May highs. As long as this breakout remains intact, it targets an initial 5% rise to 30.00 and a potential 7% rise to retest its 30.76 September 2022 benchmark high. Also noteworthy is that UUP’s 50-day moving average is crossing its 200-day moving average to the upside, indicating a positive or bullish shift in intermediate-term price momentum.
The green highlights in the lower panel show the UUP also began outperforming the S&P 500 on a quarterly (our Strategic time period) basis on Aug 16th. As long as these emerging outright and relative trends remain intact, it suggests a potentially new low-risk buying opportunity in UUP and possibly other Dollar-related assets.