- A Safe Dollar Play

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A Safe Dollar Play

Friday, 05 October 2007

By Charles Delvalle
As I just said in today’s column, I think the dollar is ready for a small rebound. And if you play your cards right, you could be sitting on a hefty profit.
First, it recently underwent a dramatic fall from the 82 area down to 78. That’s a drop of nearly five percent, which is extreme for any currency.

The second reason why the dollar should rebound is simply because the RSI just came off a strongly oversold level. The last time that happened, the dollar rallied 14 percent. Could the dollar do that again now?

With interest rates and the economy heading down, it’s not likely. Instead, I think the dollar will climb back up to the 80 level and then resume its downward spiral.

Sadly, there aren’t that many ways to directly play a small rise in the dollar. You could buy the PowerShares Dollar Bullish ETF (UUP), but you’ll make only a five-percent return on your money.

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Instead, wait until the dollar hits 80 and buy the PowerShares Dollar Bearish ETF (UDN) to leverage the dollar’s loss in value as it moves down.
Source : Investors Daily Edge

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