Home » Currency Option Trading » Currency Option Trading – Dollar Index 7th April 2009

Currency Option Trading – Dollar Index 7th April 2009

US Dollar Index - Daily Candle Chart 7th April 2009

US Dollar Index - Daily Candle Chart 7th April 2009

Yesterday’s wide spread up bar signalled a return to a modicum of US dollar strength which has followed through in this morning’ early trading, with the closing price yesterday finishing just above the 9 day moving average.  The impetus for today’s move higher in the US dollar has come from increasing concern regarding the banking system, with fresh reports that the system may be infected with up to $4 trillion of toxic debt, which as yet has to be accounted for an identified.  This information has filtered out from the IMF this morning, and coupled with the earning season in the US has increased concerns regarding the long term benefits of assets in equities.  This view is supported in the dollar index by a crossing of the 9 and 14 day moving averages but for any sustained move higher and further strength in the US dollar we will need to see a break above the strong resistance line which I have highlighted on today’s chart at 86.26 and above.

An interesting piece of news which will have a direct impact on the US dollar is the Fed’s decision on agreeing a temporary currency swap arrangement with the BOE, BOJ, ECB, and SNB, that will allow the Fed to provide foreign currency liquidity to US banks.  The total amount is estimated at 80bn euros, 30bn gdp, 10 trillion jpy and 40 bn chf.  Depending on the use of these facilities it may offset US dollar currency swaps the Fed offers to other central banks.  In simple terms it is best viewed as providing a partial break to any major downside US event and the Fed hope this will limit any downside move in the US dollar and general market volatility.    So far the market has not really absorbed this news or its consequence so we have some interesting times ahead.

You can keep up to date with all the latest currency news, live currency charts and fundamental news by simply following the appropriate links, and if you are looking for a good ECN broker I have provided more details here.