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US Dollar Index – 28th April 2009

US Dollar Index - 28th April 2009

US Dollar Index - 28th April 2009

Yesterday’s wide spread up bar in the US dollar index, can largely be attributed to two separate factors, which combined to create a flight to the US dollar as a currency with safe haven status. The first of these was the fear of a swine flu pandemic sweeping global markets and adding further to the current economic gloom, as it became increasingly clear yesterday that the virus could not be contained in Mexico, and indeed cases were already being reported in the US and Canada. The second was following unscheduled comments by ECB Council member Ewald Nowotny, who following a speech said “euro zone rates will stay low for a long time and the ECB is ready to use quantitative easing measures if needed”. This was reinforced by ECB President, Jean Claude Trichet, who stated at a meeting¬† in New York on Monday that lowering interest rates is not necessarily the best way to fight a recession. All of these elements combined to push the US dollar higher and the index ended the day on a wide spread up bar, closing marginally above all three moving averages, but failing to clear the resistance at 85.70 created in the earlier part of the month.

For any sustained move higher in the US dollar index, we first need to see a break above the 86.75 price point which would then provide the opportunity for a move higher to retest the 89.50 region once again, but with all three moving averages now converging, the trading range seems to be moving towards a period of sideways consolidation once again, with little firm direction for the US dollar against a basket of currencies and currency options.

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