Introduction:
We discussed in the last article, in the previous week, about the United States Dollar index being at an important level of ‘80’ and also this level acting as a serious resistance in the near term. Yes, it did. ‘80’ level is posing a small nuisance for those who are bullish on the Dollar index. The United States Dollar index lost around ‘3’ % last week on the news of some bailout package from the European banks. The Dow Jones did rise nearly ‘500’ points to close over the ‘12000’ mark from ‘11500’ mark.
Factors effecting:
There are certain reasons why this index clawed back from the level of ‘80’ to around ‘78’ in the previous week. The first and the foremost one, is, the European banks coming out with a package to slow down the European crisis. Some of the big European banks along with the ‘ECB’ are planning to reduce the debt situation and the ongoing crisis in Europe. This has made all the global markets to fly high and the dollar index and the bonds to fall down. Other currencies also rose against the dollar showing that the dollar index will be weak. Many analysts feel that this bailout package wouldn’t be sufficient to hold down the European crisis. This should be positive for the Dollar index going forward.
Technical Analysis:
The Dollar Index remained weak throughout the week and that one was due to some reforms in Europe and some good data from the United States. The global markets, too, rallied which was not a good sign for the dollar index.
This chart shows the movement of the Dollar index in the past few days. This clearly tells us that the ‘80’ mark is becoming a hurdle to cross. As suggested in the last article, that traders and investors should watch out for the ‘80’ mark on the upside and the ‘75’ mark on the downside, they must do the same, this week, too. ’75 – 77’ is a good support and the dollar breaking this level could see some downsides. Similarly, the Dollar breaking ‘80’ on the upside will give some gains and the trend will become bullish.
Forecast:
We suggest our readers to cautiously go long on the United States Dollar Index or sit on the sidelines waiting for the band of ‘75 – 80’ to be broken. Once, this level is broken, traders would be advised to go long or short accordingly. Breaking ‘80’ is the signal to go long and on the downside, ‘75’ would be watchful. The trend now or the direction now, is sideways. Any major news about the European crisis will definitely affect the Dollar index. There is a European summit later this week and that would have a major impact on the world markets as well as the Dollar index. So, investors and less risk traders are advised to sit on the sidelines until some news comes out about the European crisis.
Disclaimer:
The author has personal interest in the Forex markets. He may have positions and may have recommended these strategies to his clients.
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