By FXEmpire.com
The Dollar index had a pretty back-and-forth week, but eventually close relatively unchanged. In fact, we are currently bouncing around in an ascending channel that looks set to push prices much higher. However, we are currently bumping along the bottom, and this suggests that perhaps the bulls are getting a little bit tired.
However, we don’t like going against the trend, and can see that the 82 level is indeed very supportive. The fact that the bottom line of the channel is sitting just on that area right now we figure that the US dollar has a ways to go to the upside.
This of course can change if the Federal Reserve decides to expand its monetary easing policy within the next couple of weeks, which seems to be what the stock markets anticipate. If that happens, we could see a break below the 81.50 level which we have as a place in which to sell this market if we get below it. We can see that the 80 level is supportive, but the 81.50 level would break all of the momentum over the last several months, and have us looking to break much lower.
Of course, the US dollar tends to pick up strength when there are concerns out there about the economy, wars, or other such economically disruptive problems. We have plenty of those right now, and as such a “flight to safety” kind of trade could be going back up in the markets and could see the Dollar gain even more strength.
If we can break above the 84 handle, we see absolutely no reason to think that we couldn’t hit the highs at the 89 level that we saw in April of 2010. This would more than likely be predicated upon some type of crisis, but there are plenty out there that could precipitate this move. Probably the most likely one would be something going on in Europe, which seems to be a never-ending problem. At this point in time, we are much more comfortable buying the US dollar on dips and have no interest in selling it.
Click here to read US Dollar Index Technical Analysis.
Originally posted here
