Home » USD index » Dollar Index Candle Chart 7 Oct 2009

Dollar Index Candle Chart 7 Oct 2009

USD Index 7 Oct 2009

USD Index 7 Oct 2009

For a change today I am looking at the weekly chart for the USD index for currency options trading, and I’m afraid the picture is just as bleak for the US dollar as on the daily chart!  The most worrying aspect for any recovery is that in each week over the past few months, the high of the period has found strong resistance from the 9 week moving average, a bearish signal, and one  that suggests that this trend is very firmly establised and unlikley to reverse in the short term.  Last week was no exception in this respect with the high failing to breach the 9 week average, and with all three moving averages weighing heavily on the index, there is really only one way that the US dollar is heading at present, and that’s due South. The only glimmer of hope is that the congestion area ot the left of the chart in the 75 to 76 price region could provide some support, and a possible platform, but should this fail to hold, then the index will almost certainly fall once again to test support in the next region lying at the 73 to 74 region.

Until we see an inprovement in sentiment towards the US Dollar (which is currently not the case & appears ever more negative) together with a more robust economic outlook in the US, with the prospect of an interest rate increase in the medium term, then the US dollar is likley to remain a very low yielding currency.  This in turn will make the dollar a favourite for the carry trade, a position once held by the Japanese yen, a situation which can only help propel the US dollar on its journey lower.  So for currency options trading, the message remains the same – sell the US dollar for the time being.