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Currency Options Trading – USD Index 22nd September 2009

Currency Options Trading - USD Index Chart

The weekly chart for the US dollar index, really tells you all you need to know about the current state of the US dollar for currency options trading this week, with last week’s narrow spread down bar simply adding further pressure to the bearish picture following the break below the strong support platform which was built in the 77.50 price point, but which subsequently failed two weeks ago in dramatic style with a wide spread down bar on the weekly chart. With all three moving averages pointing sharply lower, and with the 75.50 price level about to be breached, the signs are not good for a US dollar recovery in the short term, and certainly from a technical perspective there is only one way that the US dollar is travelling in the short term, with the major support area in the 71 to 73 level, the next likely stopping point. However, as we all know, currency options trading is never that simple, and with the FOMC meeting now in progress and due to release it’s statement tomorrow, any hints that interest rates could rise sooner rather than later, could send the USD index higher as a result, on the expectation that the days of ultra low interest rates for the US are coming to an end. It is almost certain that rates will remain on hold tomorrow, but it is the associated statement that the currency markets will wait for and analyse in detail as soon as it is released. Whilst the current trend is downwards, at some point this trend will revers, and probably very sharply, catching many currency options trading players on the wrong side of the market, so watch out for tomorrows statement and trade accordingly.

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