USD Index 23 May 2010

The bullish momentum for the dollar index remains firmly in place despite last week’s temporary reversal which saw the index first break above 87 and subsequently pullback to 85.50 on Friday.  However, Friday’s price action closed with a doji candle which found solid support at the 14 day moving average suggesting this reversal is only temporary and as a result we should expect to see the index rally and rise further during the week.  Indeed this has already begun with the index moving above the 9 day moving average in early London trading, and with all four moving averages pointing sharply to the upside expect dollar strength to continue in the medium term once again.

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USD Index Candle Chart 17 May 2010

The dollar index has continued to surge higher, much as expected, and following the breakout above 82.50 which occurred earlier in the month.  Friday’s widespread up bar further confirmed the bullish tone for the dollar, closing and holding above the 86 price point and further reinforced in early trading with the index touching 87 before retrenching slightly but interestingly with a gapped open over the weekend which further confirms the strength of the recent move.  The next key level for the index is around 90 and should this be breached then expect further dollar strength in the medium term.  Finally this morning’s gap up has also broken above key resistance in the 86.50 area which now offers excellent support to the longer term move.

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USD Index 13 May 2010

The bullish momentum for the dollar index appears to have stalled in the past few days, as we hover marginally below the psychological 85.50 price handle on the daily chart and for momentum to be renewed we need to see a break and hold above this price point in due course.  Technically the signals are encouraging with both the 9 and 14 day moving averages providing excellent platforms for the move higher, particularly during the major pullback of Monday which saw the low of the day supported by the 14 day moving average.  With all four moving averages now pointing sharply higher and with the deep price congestion acting as a cushion below in the 80 to 82 price area the upwards direction for the index and for the dollar should continue in the short term. Longer term we are now running into sustained areas of resistance which could prevent the index rising steadily as a result and could even send it lower temporarily if the index fails to breach the 88 price point.

Dollar Index Monthly Chart 13 May 2010

Monthly chart for the Dollar Index.

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Following the recent sideways consolidation between 80 and 82 on the daily chart, the USD index has finally broken out today surging higher and breaking above 83 as a result with a widespread up candle.  This breakout follows the recent upwards trend of the past two weeks which has seen excellent support from the 9 day moving average with any short term pullback finding a cushion from this technical indicator.  Today’s break higher simply confirms the short term bullish picture and we can now expect to see further dollar strength as a result with the deep price congestion below now providing a solid platform of support.  The weekly chart confirms this picture with the 9 week moving average providing solid support to the move and the key for the longer term will now be whether the deep resistance between 84 and 88 is sufficient to cap this current recovery.  Should we break out above the 88 top then expect to see the dollar surge even higher as a result.

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