The United States dollar has been in a multi year bear market, with only a couple of respites in selling over the past 8 years. Last year, the dollar rallied strongly on a "flight to safe haven trade" during the worst of the financial crisis. While this rally was very sharp, in the larger picture, it only served as a partial retracement of the bear market decline. More recently, the dollar has been under pressure since March and despite the weak economic outlook, it appears that current fiscal policy favors a weak dollar.
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As traders, we must understand that all markets are interrelated with each other, and we need to account for the implications of a trend move in the dollar. Generally speaking, the dollar and commodities are inversely related, as most commodities are priced in dollars. If the dollar falls, it takes more dollars to purchase the same physical commodity. Thus the price for that commodity rises. While at times market relationships can decouple, eventually this inverse relationship holds true. So what are some ways to play the move in the Dollar using ETF's?

The first way is through the use of an ETF that tracks the US Dollar Index. The Powershares DB US Dollar Index Bullish ETF (NYSE:UUP) is a leveraged product that can be used to trade the US Dollar. In the chart, the first thing that stands out is that the dollar has been falling for the past four months. This is evident by the declining 50-day moving average. UUP was attempting to consolidate in the $24 dollar area, but broke out of that range to the downside and failed an attempted bounce from the prior low near $23.50. With the dollar breaking down under the recent lows, it could light a fire under commodity based ETF's and stocks.

The most popular commodity that is traded against the dollar is the SPDR Gold Shares (NYSE:GLD) which tracks the spot gold market. Gold is often used as a hedge against inflation and has a solid inverse correlation with the dollar. GLD was one of the only markets to hold up in the recent bear market, and has been close to turning the corner higher. GLD has been consolidating a huge run for almost two years now, and is starting to show some signs of an attempted breakout. In looking at the recent price action, GLD pulled back from an attempted breakout in June, but has held well above the April lows. It is now turning higher after setting a higher low. If it can clear the trendline near $96, it may breakout out of the multi year base. (For further reading, see All About Inflation)

The United States Oil (NYSE:USO) ticker is another popular ETF that trades inverse to the dollar. USO is showing an intriguing chart pattern despite what appears to be a weak economy with slowing demand for oil. USO cleared a base in May and was able to rally to the $40 area. It subsequently pulled back from this level to test the May breakout area, and held above the prior base. It is starting to turn higher, and if it can clear the $40 area, it could catch a lot of traders by surprise.

The Market Vectors Agribusiness ETF (NYSE:MOO) is an ETF that tracks agriculture stocks. The chart for MOO closely resembles the chart for USO, and the same theme of an inverse correlation to the dollar applies here. MOO respected support near $31 from the May breakout on the recent pullback, and may be headed for a retest of the $38 level. If it clears level it will have bullish implications for Agriculture stocks.

Bottom Line
There are other ETF's that can be traded as dollar weakness plays as well. If the dollar weakens, then by default, currencies of other countries would strengthen. As such, trading an ETF that tracks other markets such as the iShares MSCI Emerging Markets Index (NYSE:EEM) or the iShares MSCI Brazil Index (NYSE:EWZ) would be a viable option. Regardless of which direction a traders want to take in this area, the key is to understand how markets are interrelated and how a move in one market has a ripple effect on other markets. Which side of the Dollar trade are you on?

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