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US Dollar Index – Daily Chart For Trading Currency Options 8th June 2009

US Dollar Index - Daily Chart For USD 8th June 2009

US Dollar Index - Daily Chart For USD 8th June 2009

What a difference a day makes! Friday’s wide spread up bar was a pleasant and unexpected surprise on the US dollar index daily chart, and came as a result of the better than expected figures for unemployment in the US with the headline rate coming in at 345,000 against a forecast of 520,000, with the US dollar surging as a result against most of the major currencies. The wide spread up candle pierced and held above both the 9 day and 14 day moving averages, along with a breach of the resistance at 80.25, suggesting that this may be more than a short term reversal, and indeed this momentum has continued in early trading this morning, confirming the bullish reversal signal outlined in last week’s market commentary. For any sustained move higher we will need to see the 40 day moving average breached, and if this is combined with a break through the strong resistance currently in place at the 84-86 region, then we could see a retest of the 89 area¬† once again.

However, before we all get carried away on the euphoria of one day’s candle, this price action has to be seen in the context of the broader economic picture. With investors fear now oscillating between that of a depression and the fear of rampant inflation as a result of the vast amount of money pumped into the monetary system, these volatile days are likely to be a feature of the US dollar index ( and the US currency ) for the next few months, and for some time to come, as each piece of fundamental news is dissected and analysed. For the time being, and from a technical perspective, this looks as though it could be a sustained reversal, but the region outlined above will provide the first test as we move higher once again.

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