Introduction:
As we have seen, in the past weeks, most of the world markets have recovered and recovered well. This was on the back of some strong earnings by some big companies and the corporate news flowing around. On the back of this rally, we have seen that the Dollar index has retreated from its high of about 82 to 80. The Dollar index is now at its crucial support level which if breaks will lead on the downside. We can expect targets of around 77 and 78.
Factors Affecting:
Earnings are playing a major role and they will continue to do so in the coming weeks. The European debt crisis is also slowing down which is helping to lift the stock markets across the world. Dow Jones has climbed to the highest level since 5 months and is continuing to break its way through the top. Interest rate cuts, China’s good growth and some other factors are keeping the market on track. If this continues to be good, we will be seeing the dollar index fall below its crucial support level of ‘80’ and come down to lower levels.
Technical Analysis:
In the picture below, we can see that the Dollar index has retreated from a high of around ‘82’ to ‘80’. We can also see that the Dollar index has broke the level of ‘80’ once. But as the support is fquite strong and that is the reason the dollar index again went back to the ‘80’ mark. Unless and until it falls below the previous low, it is in an uptrend. The uptrend is quite intact and there is no reason for the long term traders to panic. On the long term charts, the Dollar index is quite clearly in an uptrend. In the short term charts one needs to be careful as the index is at the support level. If the trend breaks, then sideways trend comes in to place which always plays with our stop losses.
Forecast:
As the short term and the long term trends are quite intact, one can go long on the Dollar index keeping a strict stop loss of ‘80’. Or one could wait for the level of ‘80’ to break and one can initiate shorts keeping the trade price as a stop loss. The long term traders those who are holding their longs can hold on to their positions or square them off according to their risk levels. If the index breaks the ‘80’ mark, the trend becomes sideways which becomes difficult to make money.
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Disclaimer:
DISCLOSURE & DISCLAIMER: THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER. VISIT US FOR MORE INFORMATION AS WELL AS UP TO DATE FOREX ANALYSIS AND FOREX NEWS.