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US Dollar Index – US Dollar Daily Chart 10th July 2009

Dollar Index Daily Chart - 10th July 2009 US Dollar

Yesterday’s unexpected criticism of the US Dollar by a member of the Chinese delegation at the G8 summit (it had been thought that the topic was off the agenda, as indeed I myself thought following the departure of Hu Jintao to sort out his domestic problems, added a bearish element, purely because this spooked the forex markets.  This was one of those curious occasions when the news items itself caused the volatility rather than the content as there was nothing new in these comments and it was simply the case that the item appeared to be under discussion once again that unsettled the market.  As a result the daily candle began the session as a wide spread down bar, falling throughout the day, but subsequently recovered in later trading as the markets absorbed the fact that there was little or no change in the eventual statement from the G8.   The candle closed the session with a deep lower wick suggesting that the Index was once again finding some bullish support at this level as we continue to consolidate sideways in an ever decreasing trading range.  The three moving averages are now virtually superimposed and which provide little in the way of indication as to the future direction of the Dollar Index.  As the coiled spring effect winds ever tighter we should fully expect a dramatic and volatile breakout in due course but it is not clear at this stage what the trigger will be, or indeed in which direction, which is not terribly helpful to us as traders.  As a result we therefore have to be patient and wait for the daily chart to provide the signals that we now need to trade the US Dollar with any degree of confidence.  A break above the resistance now in place at 81 and above is needed to signal a break to the upside whilst any move to the downside which penetrates the current minor support at $78.50 could suggest a significantly deeper move.

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