Home » Currency Option Trading » US Dollar Index – Trading Currency Options 12th May 2009

US Dollar Index – Trading Currency Options 12th May 2009

US Dollar Index Daily Chart - 12th May 2009

US Dollar Index Daily Chart - 12th May 2009

Following Friday’s wide spread down bar yesterday’s candle provided little in the way of respite for continued US dollar weakness, closing the day only marginally higher and a long way from any suggestion that we are likely to see any reversal of the US dollar’s fortune in the short term.  With all three moving averages now pointing steeply lower and with the 14 and 40 day moving averages having crossed this morning’s price action comes as no great surprise with further US dollar weakness across the major currency pairs.

With very little in the way of support directly below we could now see a deeper move lower, possibly to re-test the minor support level at 78.50 and if this fails to hold we could see a lower move still even as far as the 73.50 to 74.0 price point in due course.  The great unknown, of course, as far as dollar weakness is concerned is the effect of the major equity markets with many market commentators now suggesting that these are possibly overbought following the strong rally since March which has partly been fuelled on sentiment rather than key fundamentals.  Should equities fall significantly, then this could translate into a return into the dollar with a consequent reversal in the dollar index, but there are no signals from a technical perspective that this is likely to happen at present.

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