The FX Trader’s view – Over the last few months the US Dollar Index has continued to grind lower, recently reaching/eroding a long term 76.4% ‘support’ level. Subsequent to this there has been a positive reaction, with s/term bull signals beginning to mount.
- MONTHLY CHART:
The main sign in 2008 that long term bears were losing momentum was the breach of the bear channel top projection.
Subsequent resistance was found from the 38.2% recovery level.
The 76.4% pullback level is so far having a supportive influence (note this has worked well in EUR/USD too – see last week’). - DAILY CHART:
In the FX Specialist Guide we have repeatedly stated that it is possible we have been seeing a third/final downleg (from 81.466 08-Jun high) in the move that commenced from the 89.624 Mar high.
The recent violation of the bear channel top is encouraging for early bulls, while a close above the 76.817 03-Nov high now provides an initial bull signal.
Recovery through prior 77.428/77.688 lows (with current 23.6% level just above) would provide next confirmation of a temporary Dollar recovery underway, and we could next target the 80.000 38.2% recovery area.
S/term dips would be viewed as temporary.
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