Introduction:
The Dollar Index has breached the level of 80 and as said in the previous articles, it is in an up trend. It has been finding support at the 80 mark which has been a stiff resistance in the past. There were many events that took place in the past week and these judged the movement of the Dollar index as well as the equity markets. Data which came out of the United States helped the markets to be in the positive territory and helped them to rally. But, interestingly the Dollar index didn’t come below the 80 mark or, in other words, didn’t fall significantly. There was a fall but it was un-noticeable.
Factors Affecting:
The data which came out of the United States helped the equity markets around the world to jump and in turn, made the Dollar index to be a bit weak. The main point that is worth noticing is that the Dollar index is still above the crucial 80 mark, which has been a strong resistance in the past months. The most awaited European Summit is completed and there is no major reaction to that part of news. Many analysts feel that the European debt crisis can’t be easily solved and it will be slowing down the economy as well as the markets in the coming future.
Technical Analysis:
The 80 level which we have been talking of for weeks since now has been broken. But one would have expected a more upsurge in the volume picture as well as the price picture. Talking about the price, the Dollar index shot up by around 1 % and then retraced back. But, the important point here is that the Dollar index is still above the 80 mark and this 80 mark will act as a serious support for it.
In the chart above, we can see that the Dollar index has breached the 80 mark in the middle of December. Now it is hovering above that 80 mark. The global factors are likely to play an important role in the movement of the Dollar index. The currencies of most of the developed economies are tumbling on the back of the weakness in their respective economies and this has helped the Dollar index to shoot up.
Forecast:
As long as the Dollar index remains above the 80 mark, there is no reason to sell it. There has been a lot weakness in most of the other currencies against the Dollar and this is helping the Dollar to move up. The Dollar index is still in an uptrend. The only fear, here, is that the breakout of that 80 mark wasn’t on huge volumes. One would have expected the breakout to be quite significant. But, the Dollar index just touched a high of 80.6 and then retraced back. So, one needs to watch out for some good volumes and trade accordingly. Traders could go long on the Dollar index keeping a strict stop loss of just below 80 mark.
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Disclaimer:
The author has personal interest in the Forex markets. He may have positions and may have recommended these strategies to his clients.
