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Currency Market: US Dollar Index Failed Right Where It Should


The US Dollar Index kissed the 200-day moving average perfectly, and rolled right back over. Breaking 79 opens the door to 75.

The US Dollar Index failed right where it should over the past week, and validated the 200-day moving average and 81 level as significant resistance. As I mentioned last week, I liked adding short exposure to the DX above 80, and I would continue to sell this market. The next key level in my view is 79, and a close below there would be very bearish for the DX, as it would open the door to further US dollar weakness back into the mid 70s. We'll use the 75-77 range as a target if we do see a DX close below 79.

You can see the bearish action in the US Dollar Index below.

Click to enlarge

It looks like any plays that benefit from a weak US dollar should continue to act well as we start off 2013, and I would also point out the nice bull flag in gold. It looks like if gold can get above the 1700 level, then it will be a straight shot to 2000 or higher. I would look to add exposure on pullbacks.

Good luck out there!
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