The dollar index is catching a bounce off support but not rallying like it did the last time prices hit the 76 area.
A look at the chart below will show that bounce of the dollar is not as strong as it was the last time, calling to question the possibility of a strong rally from the 76 area. Here goes the analysis.
- In September 2008 the dollar index bounced strongly from the 76 area and had long bottoming tail that showed the strength of the bulls. The area is shown by a vertical white line with the date at the bottom.
- Now the prices consolidated in the area for two weeks before moving up. We may see a rally, but not as strong as the one we saw last year.
- For the index to run up it has to clear the resistance area shown by the red box above current price. Also note that the downward sloping white trend line has not yet been tested
- Additionally prices are below the all the four important moving averages 10 (in white), 20 (in pink), 40 (in yellow) and 200 (in red). All the averages are still sloping down, showing the bearish trend of the dollar is not broken
- If the index breaks and closes below the 76 support area marked by the green box, prices can head lower to the next green box area in the 72 area.
- Finally note that carry trade is still biased against the dollar with other currencies offering higher interest rates
For more details and chart CLICK HERE
