I wanted to give a quick Friday morning update on the currency/commodities markets as we head into the weekend.
As Emerging Money readers and subscribers it’s no surprise the U.S. dollar continues to strengthen and the stronger dollar in turn is putting pressure on the commodity prices. Since the commodities are priced in U.S. dollars as the U.S. dollar strengthens it take less dollars to purchase said commodities.
However, further downstream the effect of lower priced commodities is also adding pressure to commodity sanative currencies. This can be clearly seen in the case of the Aussie dollar against the U.S. dollar pair or AUD/USD.
Not only does the Aussie dollar feels the pressure from the stronger dollar but as a commodity exporting country the currency faces commodity headwinds as well.
Yesterday the currency pair tested key resistance and failed reconfirming its move lower. Those looking to for exposure to the trade setup can look at a couple of ways to play it within the equity markets.
1) Consider long positions in the UUP
2) Consider a PUT option or vertical PUT position in the FXA
3) Consider a pairs trade by buying the UUP and selling the FXA