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US Dollar Index – Trading Currency Options 1st June 2009

US Dollar Index - Monthly Chart US Dollar 1st June 2009

As today is the start of a new month I thought it would be appropriate to take a look at the monthly chart for the dollar index which tends to provide a different perspective on the recent bout of generalised US dollar weakness we have seen in the last few weeks, and as we can see (not a great surprise) last month ended with a wide spread down bar closing below all three monthly moving averages.  What is perhaps more interesting, and which we often tend to forget when concentrating on the daily chart is the overall context of where we are in terms of the US dollar cycle, and as clearly demonstrated on the monthly chart we can see that in the current price region of 75 to 78, looking back over the last 10 years, we are at or approaching a possible bottom.  Whilst there is plenty of potential for the index to fall further it would seem likely that 72 to 75 may provide a respite in the short term and in the longer term we could see a reversal but the key to any sustained dollar strength will be a breaching of the 90 region which now offers strong resistance to any move back up which is probably the key for the longer term.  In the short term with all three moving averages now beginning to turn lower it seems that we may well have a further month of dollar weakness and if the spread of last month continues then we could be as low as 74 or 75 by the end of June but this could be the start of the bottoming out of the index.

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