posted by 4x-news on Jan 21

One of the important questions for 2010 will be whether the downtrend in the dollar will continue or change. The forex traders that succeed in picking a bottom in the dollar will reap significant rewards. Whether the November low will hold is questionable, but the housing crisis in the United States appears to be spreading so some dollar recovery - even by default - may be likely.
A fairly new set of Forex Trading and diagnostic tools in the form of Exchange Traded Funds (ETFs) are now available to the forex trader. ETFs are becoming an important asset category and provide investors and traders wirh new opportunities to participate in targeted markets. For the forex trader, ETFs can be used to derive supportive information about the direction of currencies. Many ETFs also offer options providing even more potential for shaping trades. ETFs that are related to currency trading include dollar sentiment ETFs, ETFs on economic sectors (housing, real estate, etc.), ETFs tracking currency pairs and ETFs on commodities. All of these categories can help the forex trader in deciding direction, especially ETFs that track dollar sentiment.
The forex trader can use the Powershares DB U.S. Dollar Index Bullish Fund (UUP) to detect a shift in the dollar sentiment. UUP employs a bullish dollar strategy. The ETF is long the dollar against several currencies including the euro, yen, British pound, Canadian dollar, Swedish krona and Swiss franc. Obviously this has not been a profitable fund recently, but this ETF can indicate the mood of the market. Changes in its price will alert the forex trader when there is a shift in dollar sentiment. In contrast the Powershares U.S. Dollar Index Bearish Fund (UDN) is an ETF with a bearish strategy.