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USD Graphic Rewind: Bullish-Outside Day Friday Points to Further Gains in New Week

USD Graphic Rewind: Bullish-Outside Day Friday Points to Further Gains in New Week

2011-05-23 06:58:00
Jonathan Granby,
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USD_Graphic_Rewind_body_dxy5.png, USD Graphic Rewind: Bullish-Outside Day Friday Points to Further Gains in New Week

Created using Bloomberg

The dollar index climbed smartly on Friday after having spent most of the week consolidating its gains above 75.00. After an early dip below this key support level on Friday the index raced higher and posted a bullish outside day indicating that further gains are in the offing in the early week. As jitters continue to rock sentiment toward the EMU accompanied by downgrades and political turmoil in Greece and Spain investors will continue to shun the euro. As a result the buck has finally been climbing after being brutally beaten down for most of the early months of 2011.

Over-night we have seen similar themes dominate trade as investors continue to shun the euro, the buck and other safe haven currencies are the major beneficiaries. Sentiment has taken a further knock over-night with China’s flash PMI manufacturing reading showing the activity has slowed to a 10-month low, the highly correlated Aussie has taken a dive as a result. Additionally, as we enter a new week the index is flirting with the 76.00 level, a key hurdle to overcome if the index is to accelerate gains back toward the psychologically important 80.00 region. We mentioned last week that the index was likely to face some resistance in the 75.00-76.00 region but once it breaks out of this area we hope to see a quick move to 77.00 and higher.

Written by Jonathan Granby, DailyFX Research Team

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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