Dollar Index Daily Candle Chart - USD 30th July 2009

The US dollar index, and hence the US dollar, received a much needed shot in the arm yesterday on the daily dollar index chart, ending the session with a wide spread up bar, which followed the long legged doji that I outlined in Wednesday’s analysis as a possible turning point for the US dollar. The dollar duly delivered and ended the session above both the 9 day and 14 day moving averages – a positive signal but insufficient to signal anything other than a short term reversal at this stage, rather than any longer term structural change in sentiment. For this to occur we need to see two things. First we have to penetrate and hold above the deep resistance now immediately ahead in the 79 to 81 price band, coupled with strong support from all three moving averages. Secondly we then need to see a sustained effort to break back above the 86.50 region and beyond. If these elements combine in the next few weeks, then we should see a resurgence in the US dollar as a result, however, this could simply be a short lived breather in the market, before the index heads lower once again – only time will tell, but the above analysis should provide us with a better clue for the future as we watch events unfold on the fundamental news front.

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US Dollar Index Daily Chart - Dollar Index 21st July 2009

Monday’s wide spread down candle on the US dollar index, did little to lift the gloomy picture for the US dollar, adding further to the heavily bearish picture of the last few weeks, further emphasized by the gapped down opening of Monday morning which simply reinforces this view. With all three moving averages now beginning to unwind, and the 9 day movong average turning sharply lower, there seems to be only one direction for the US dollar at present, which is now heading South, fast!  The depth and speed of the move lower will largely depend on the next two days of testimony by Fed Chairman Ben Bernanke and should his comments and tone be relatively bullish overall, then this could trigger a further return of risk appetite with a consequent uplift in equities to the detriment of the poor old US dollar. From a technical perspective, if the 78.50 price level is breached, which now seems imminent, then the next barrier level is an intermediate one at 76, and should this fail to provide any support then a much deeper move should be expected back to retest support in the 71 – 72 price region in due course. The fate of the US dollar in the short term now hangs in the balance as Bernanke prepares to speak.

You can keep up to date with all the latest fundamental news on the economic calendar, latest currency news and live currency charts by simply following the links.  I have also included details on an excellent ECN broker.

US Dollar Index - Daily Candle Chart 15th July 2009

This morning’s price action in the US Dollar Index has perhaps provided us with a portent of the fate of the US Dollar in the short term as the recent sideways consolidation begins to unwind and the Dollar Index begins to roll over like a stricken vessel, to sink quietly below the waves.  Yesterday’s candle struggled to break above all three moving averages and ended the day in a compressed trading area and perhaps signalling that a breakout was imminent, which is occurring at the time of writing.   We now need to consider how deep this move is likely to be which has largely been triggered by better than expected fundamental news on the economic calendar in the US this morning, signalling a creeping optimism in investor confidence as they begin to buy equities once again.   The first port of call as we press the down button is that at 78.50 and if this is breached then we may well see a dramatically deeper fall, first towards the 75 region and then onwards towards 73/71 area, last seen in late August 2008.

You can keep up to date with all the latest fundamental news on the economic calendar, latest currency news and live currency charts by simply following the links.  I have also included details on an excellent ECN broker.