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Dollar Index Chart 4 Sep 2009

The USD index continues to bump along the bottom, desperately trying to find a foothold and some support at the current price level, as it attempts to build a position from which to rally higher and recover from the downwards decline of the last few months. The signs however are not good, with yesterday’s price action negating most of the gains of Wednesday, and once again closing the trading session below the 9 and 14 day moving averages, and just above the 40 day average. Technically the USD index daily chart remains very weak, and only a break and hold above the 81.50 price level will signal that a possible recovery is likely, supported by all three moving averages. Until we see this occur, then the outlook is bleak for the US dollar, but with today’s NFP data due for release in the US later, will either provide the spark that the dollar index desperately needs in order to kick start a recovery in the fortunes of the US dollar, or simply drive it further down. With the US and Canadian markets closed on Monday for a national holiday, we may have to wait until later in the week to see any follow thorough from today’s numbers, but should the index close below the current floor at 77.50, then this will signal a much deeper decline for the US dollar and a subsequent move lower for the index.

USD Index - Daily Chart For US Dollar 23rd August 2009

The USD index ended the forex trading week with a mixture of good and bad news for the US dollar, which was represented from a technical forex analysis perspective with a wide spread down bar, but one with a deep lower wick. The negative side of Friday’s trading session for the USD index was of course the fact that we have now broken below all three moving averages once again, suggesting an imminent move lower for the US dollar once again. However, the positive side to Friday’s trading was the depth of the lower wick, which suggests that there was a degree of dollar buying in the market, no doubt triggered by the fall earlier in the trading session. Overall, the technical picture looks very weak for the dollar, and should we see a break below the 77.50 price handle, then this could signal a much deeper move, initially to re-test the interim support at the 76 price point, and should this fail, then the 72 price handle becomes a distinct possibility. At present there is nothing on the daily or weekly chart for the USD index, to suggest that this long slow decline is likely to change in the short term, with the weekly chart looking very bearish following a three candle pattern of an up bar, doji, and down bar, with all three moving averages weighing down once again. With extremely strong resistance now in place at the 79 to 81 price range, for any strong reversal we will need to see a break and hold above this technical level for any move higher to be sustained.

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