US Dollar Index Market Analysis

Written by JS T Alexander | 21 November 2011

For the past decade, with more e-trading developments and accessibility to the markets have made it easier to monitor market behavior during market holidays. The up-coming trading period before the Thanksgiving & towards the season holidays would prove to be one of those times where a handful of institutional and majors players would again be in place. Pls. reveiw this article once in awhile. 

Although with an expected mix bag of market directional movements and the general trend developments into a bullish advance through the year end from thereon as a comparison as far back in 2008 that should not be discounted unless otherwise proven not to follow the cyclical pattern hereunto.

On Technicals: The weekly chart formation of the USDX shown above indicates the overall picture of a bullish trend. What is equally important is the directional trend where one needs to position between the daily price movements relative to the USDX currency counterpart. The main chart shows 3 major tech indicator using the FIB 1(blue horizontal lines) as prices of the USDX within the 78.85 (R1) and 76.75 (S1). The FIB 2( Blue Diagonal lines) would indicate the next retracement levels of resistance on the way higher, combined with the FIB 3 (Red horizontal lines above) upon penetration of any upward price movement.

These are all in preparation as to where a breakout would occur before hand. And the next technical application would be the Elliot Wave; where an appropriate target objective would be projected upon a breakout on the upswing. And this would be accompanied with considerable volumes and open interest increase that can only be derived and identified from the USDX financial futures traded on ICE at the end of the trading week. This can be compared with the 'Commitment of Traders' report and provide a much clearer picture; if and whenever the US Dollar would have enough room & legs to pursue an upward swing. This procedure is a sequential process and methodology that should always be applied in deriving a sound techncial and analytical judgement prior to a trading decision. In short - due diligence process.

A rising channel indicates the positive tone in line with the combined Stochastics & RSI levels below the chart. However, there would still be some considerable distance to re-establish a more convincing recovery. Pls. check USDX futures for weekly VOI indicator to identify increase or decrease in both criteria. A probable re-test of the 78.85 and a final attempt with enough volumes with positive funadamentals may trigger and justify the market's outlook towards the closing of the trading year.

However,as for the US Dollar unexpected downward distortion after touching the 79.83 by dropping back down in October for a re-test of the 74.72 low was the appropriate corrective move in preparing for the 2nd leg higher where the market conditions are presently at. The backlash of news reports from both continents have been dragging this lagging recovery which should be respected from the market behavior. As price movements by market numbers doesn't lie. And the only way that we can stay unbias of any market analysis is to always trade with a level playing field in any given position(s) while in the market.  Reminder: the 77.90 - 78.10 are critical support trading range.