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Currency Options Trading – USD Index 25th September 2009

Currency Options Trading - USD Index 25th September 2009

The usd index received a mild boost yesterday as the forex markets continued to absorb the detail from the FOMC meeting of Wednesday, with the index closing with a wide spread up bar ending the currency options trading session marginally above both the 9 day and 14 day moving averages. Clearly this is a positive sign for the US dollar, but hardly sufficient to signal a change in the bearish sentiment evident on the daily chart, and it will take far more than simply one trading day, to reverse the long decline of the US dollar. Technically the chart remains very weak, and heavily bearish, with the 40 day moving average adding further pressure. From a fundamental perspective, little has changed in the economy since Wednesday’s meeting to suggest that we are likely to see any change in interest rates soon, leaving the US dollar to continue in its current role as the low yielding currency of  choice for the carry trade, replacing the once favourite Japanese yen.

Until the FED signals that rates are set to rise, then the demise of the US dollar is likely to continue for the longer term and for the USD index, and currency options trading, this means that we may well see the index fall to the next level of support in the 72 price region in due course. The only positive that US dollar bulls can take from this week, is that the weekly index chart seems to be forming a hammer candle, which could suggest that we may see a short term rally next week for the index, but again, any short squeeze higher is likely to be a temporary reprieve at best for the dollar.

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