Home » Currency Option Trading » US Dollar Index – Currency Options Trading 4th June 2009

US Dollar Index – Currency Options Trading 4th June 2009

US Dollar Index - Daily Chart 4th June 2009

US Dollar Index - Daily Chart 4th June 2009

Yesterday’s wide spread up candle on the daily dollar index chart, provided some much needed respite for the battered US dollar, closing the session slightly below the 79.50 price point, and leaving us with a bullish engulfing candle signal. Clearly one swallow does not make a summer, but this could be the first sign of a reversal in fortune for the US dollar, even if only in the short term, with yesterday’s move being triggered by a series of factors. The first was a fall in equities along with commodity markets in general, as the bullish sentiment fell away, with many market commentators now suggesting that a V shaped recovery was unlikely and that the current bullish rally in equities had ignored much of the fundamental news staring it in the face, and for the most part had been trading blindly on sentiment for several weeks. Secondly, and as a consequent of the first, many currencies were now looking very overbought or oversold against the US dollar. Finally with some worse than expected figures from the ADP ( a reliable indicator for Friday’s more significant NFP data), these factors all combined to help strengthen the US dollar against most major currencies. Whether this is a temporary reversal, or the start of a longer term trend, only time will tell, and the first stage for the longer term would be to see a break above the 81.25 price region, coupled with a move above both the 9 day and 14 day moving averages. Should this fail to materialise then we can assume that this is simply the market taking a breather, and the strong downwards move will continue in due course. However, whilst only a small point it is interesting to note the low of both Tuesday and Wednesday, providing a neat ‘tweezer bottom’ at 78.50 – not sufficient to trade on, but interesting nevertheless!

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