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Currency Market: US Dollar Index Moving Higher, Breaking Through the 80 Level


The euro is breaking 1.30 on the downside after the French election. Aussie dollar's at new lows for the year!

MINYANVILLE ORIGINAL Well, it looks like the US Dollar Index rally is trying to kick into a higher gear. After successfully testing the 79 support again, the US Dollar Index is now pushing into the 80 resistance level, thanks largely to the weakness in the euro. We can probably expect a little consolidation here around the 80 level, but keep in mind the risk reward in the US Dollar Index is still skewed very favorably to the upside. The rising 200-day is bringing support up to the 78.5 level, and longer term I continue to believe the upside is well beyond 90. Great risk reward, and definitely a winning trade to add on pullbacks! See the push into 80 below.

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The euro is obviously the primary culprit in the US Dollar Index rally, as the euro plunged below 1.30 late Sunday and also this morning, as the French elections disappointed the bulls. We have been watching this 1.30 support level for some time now, and closing down here opens the door to further downside near 1.25 and the January lows. Longer term, I think the euro could easily trade back to parity with the US Dollar, so I would use any rallies to add to winning short euro positions. See the 1.30 break below.

Click to enlarge

The Australian dollar has also taken another leg lower, and is actually breaking down to new lows for the year as the entire commodity complex is under heavy selling pressure. I continue to think the Aussie could trade into the mid 0.90s, and I would be adding to winning short positions on any rally back into 200-day resistance around 1.03. It certainly seems like the risk-off trade is gaining steam, so I would be careful out there! Tighten up stops and manage risk…it looks like some big moves are brewing!

Click to enlarge

On another note, the MTAEF eBay Auction runs live until this Friday! This is a great chance to bid on time with some of the best market minds in the business! Check out the links below, and I sincerely thank you for bidding them up for a good cause! [Editor's Note: Both Todd Harrison, Minyanville's Founder, and the author, Cody Tafel, are participating in MTAEF.]
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