Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Currency Market: US Dollar Index Continues to Chop Around the 80 Level


The Japanese yen's weakness is really the only thing holding up the US dollar.

The US Dollar Index continues to trade just under the 80 level, and if the longer-term trend is indeed higher, it should find support here at 79.

I continue to like the risk-reward in US Dollar Index long positions, and I think this is probably the best risk-reward trade available in the markets right now.

Downside should be limited to the 200-day moving average just below 78, while much longer term you could make a case for a move back to the 2001-2002 highs around 120. Anytime you can find a reward-to-risk setup of 20-to-1 in the markets, I would consider that a fat pitch!

Click to enlarge

The euro will be critical for the US Dollar Index because it is such a heavy weighting, and it looks like the euro is forming a head-and-shoulders top pattern here around 1.32. A move back below 1.30 would confirm this and project a move down to new lows at 1.25. That would also break significant levels on the weekly chart, and longer term I think the euro could easily trade back to parity with the US dollar. See the weekly chart below, and it certainly does not look bullish!

Click to enlarge

The weakness in the Japanese yen is really the only thing keeping the US Dollar Index well bid, as most of the other currency crosses are trending higher against the US dollar short term. The yen has had a very sharp downtrend so far this year, and it is probably one of the bigger stories in the currency markets this year. Remember that this is a very long-term trend line that has broken to the downside, so it could still go much lower. Any rallies in the Japanese yen should be used to sell. See the trend line break below.

Click to enlarge

Keep a close eye on this US Dollar Index because I think this could be the entry point for what could be one of the bigger up trends over the next couple of years. We'll have to see what the market has in store for us…good luck out there!
< Previous
  • 1
Next >
Positions in EUO, EURUSD, GBPUSD
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos