Friday’s ETF Chart To Watch: PowerShares DB USD Index Bullish (UUP)

by on December 16, 2011 | ETFs Mentioned:

Domestic equity indexes snapped their ugly loosing streak for the week after positive economic data paved the way higher for stocks. The Dow Jones Industrial Average led the way higher with a modest 0.38% gain, while the Nasdaq lagged behind, clinching a 0.07% gain on the day. Better-than-expected jobless claims data along with an upbeat manufacturing report gave way to the bulls on Wall Street to reclaim some lost ground, following the rampant selling pressures that have been plaguing equity markets all week. Gold edged a bit lower following yesterday’s nasty sell-off; futures prices for the precious yellow metal closed near $1,570 an ounce as the trading session drew to a close.

Investors will shift their attention to Wall Street later today as U.S. consumer price index data is released. The PowerShares DB USD Index Bullish (UUP) is our ETF to watch for the day as it may experience an increase in trading volumes after investors scramble to move in and out of positions following the latest inflation report. Analysts are expecting for month-over-month CPI to come in at 0.1%, versus the previous reading of -0.1%.

Chart Analysis

UUP has endured an arduous downtrend over the past two years as the U.S. dollar has faced numerous headwinds in currency market. Nonetheless, recent uncertainty stemming from the deficit drama at home coupled with worrisome Euro zone debt woes have paved the way higher for the greenback [see For ETF Investors, Currency Exposure Matters]. The U.S. dollar has taken on safe haven appeal in recent months as volatile trading across equity markets and an ugly debt crisis overseas have sent investors running for safety. UUP is now back above its 200-day moving average and appears poised to move higher, seeing as how it has managed to close above resistance at the $22.50 level for the last two days [see UUP Returns].

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From a technical perspective, UUP has seemingly bottomed out at $20.84 a share on 5/4/2011. UUP has significant support at the $21 mark, seeing as how it has held support above this level on several occasions (5/4/2011, 6/7/2011, 7/26/2011, and on 10/27/2011).


If U.S. CPI comes in worse-than-expected, equity markets could face selling pressures as the U.S. dollar takes on safe haven appeal [see Black Swan Hyperinflation ETFdb Portfolio]. Likewise, UUP may continue its trek higher and head towards $22.75 a share. On the other hand, if U.S. CPI paints a bullish picture, a stock market rally may put a damper on the dollar’s recent run-up. In terms of downside, UUP could fall back to $22.25 a share, although investors should note that the next level of major support lies at $22 a share. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.

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Disclosure: No positions at time of writing.