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Currency Market: US Dollar Index Trying to Find Support Again at 79 Level


The euro has rallied around the Greek bailout news, but 1.33 should be near-term resistance.

The US Dollar Index (UUP) was not able to break out above the 80 level last week, primarily because the euro strengthened ahead of the Greek bailout this past weekend. Watch the 1.33 level on the euro, as that is where the last rally failed.

The US Dollar Index is now back testing the 79 support level, and I would expect it to consolidate here for a bit between 79 and 80 until we get a confirmed breakout one way or the other. The longer term trend for the US Dollar Index still seems to be turning higher, so I would think that after some consolidation, it should move back above 80 and resume the uptrend.

Click to enlarge

As I mentioned last week (see Currency Market: US Dollar Index Is Now Trying to Turn Higher at Key 79 Level), the Japanese yen has significantly broken down, and I would use any rallies to sell or short.

This near-term trend accelerated lower last week, as the 200-day moving average break really saw bears step up aggressive selling. Any rally near the January low should most likely fail and offer a better risk-reward setup to enter bearish positions. Keep in mind this is a very long-term trend that is changing, so the downside risk to the Japanese yen is very significant from these levels.

Click to enlarge

Another long-term trend I think has turned lower for good is the EURGBP cross. The euro had a huge rally against the British pound during the 2007-2009 financial crisis, and it has basically consolidated ever since.

This cross has rolled over and started to trend lower. I would look to short the EURGBP here just below 0.84, as it has basically failed at this level each time it has been tested this year. Once the euphoria around the Greek bailout fades, I think it will roll back over and trend lower again. See the chart and 0.84 resistance level below…good luck out there!

Click to enlarge
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Positions in EUO, EURGBP cross, Japanese yen futures
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