Update on Oil and the US Dollar
On Friday, we flagged a potential setup in oil, whether that was in /CL /QM or the USO ETF.
Now I just want to flag a quick update here ahead of the Fed, because I’m sure things are going to get busy here after 2pm ET.
Previously we had said the “$89 to $90 region would warrant a trim, followed by $93 to $94.”
Well, we are there as /CL is currently trading $90.
$3 to $4 in profit in /CL is a nice hunk of change — as you know, we’re talking several thousand dollars per contract.
The Update: I would be trimming, at the very minimum, 1/3 of the position. However, going down to a half position or even just a 1/3 position is somewhat prudent.
While the action out of oil does look constructive, the Fed can really move markets and I don’t want to cough up what we’ve already made. With that in mind, I personally like a half-trim here and a break-even stop-loss.
There’s also nothing wrong with blowing out of the entire position here and booking all gains.
Oil
If /CL continues to run, $93 to $94 could be the next trim zone.
As for the US Dollar
The Fed is the is going to make-or-break our position in the dollar right now. As such, I personally will be down to a half position in this name against a B/E stop (likely on a closing basis). As much as I don’t want to get stopped out and see it reverse, I am not letting Powell & Co. turn my winner into a loser. Manage how you see fit, though.
Higher rates for longer will strengthen the dollar. A minor pivot/dovish hint will hurt the dollar. It’s as simple as that.
UUP bulls can consider a small trim at $30.25. More aggressive players can wait for $30.50.