December 29th, 2009 by 
Here’s a final year end U.S. Dollar Trade Update for 2009.
I posted a few charts in early December to consider as contrarian plays because at the time, everyone was short the U.S. Dollar and long Gold.
Everywhere you turned, people were talking about how high Gold could go, inflation and how low the U.S. Dollar would go.
For contrarian traders, that early December post proved to be the turning point. Here is a link to that original post: U.S. Dollar Trade Update 12-02-2009 and a few follow up posts I’ve added since then: U.S. Dollar Trade Update 12-06-2009 and Gold Trade Update 12-07-2009.
The first chart below is of the U.S. Dollar Index. You can see the nice reversal from the multi month decline that has occurred since the early December post I alerted readers. Prices have moved strongly higher, through the 50 Day MA. The RSI has since become a bit over bought and prices appear to be in a normal pullback from the recent run. Also notice the 50 Day MA has now turned up for the first time in several months.
The next chart is of GLD. After a near vertical hyped ascent, Gold, and GLD, appear to have come back to earth so to speak. Prices here have also breached the 50 Day MA, but lower in this case.
Prices do not appear to be near term oversold yet, but with the recent decline, there is room to go either way in the short term. Any upward move in the near term may provide additional short entry levels for those who missed the potential first leg down here. This is of course, if you feel contrarian in that Gold has lower to go.
The next chart is of DZZ, which is a possible security to trade taking advantage of a decline in Gold.
This chart also has provided a nice monthly return for those who took advantage of the early December post. A 20-27% move higher has occurred since then in DZZ.
You can see prices have moved up to the 50 Day MA, which is also near the Gap that was left on the recent decline in November. What would be nice to see here is a normal type of pullback, and then a continuation move higher. If this appears to be happening, a large leg upwards could be underway bringing prices much higher from here.
The final chart below is of UUP for those who like a little less risk. It has made a respectable 5+% move higher since the early December post. Not too bad for less than a month’s return.
Same situation here following the others above- a normal pullback could be in order, potentially moving to the 50 Day MA as a support level, which is now turning upward.
That’s about it for now. Please note that a “pullback” as I have mentioned above is not necessary to occur at this point. There is always the possibility that prices will continue in their current trend, especially since they appear to be coming off a multi-month trend reversal.
