Dollar Index Takes Out Support Inching Closer to Range Lows
The Dow Jones FXCM Dollar Index (ticker: USDollar) took another small step toward testing those range lows by 9,320 after it broke through and closed below a rising support line off those lows yesterday. The greenback was on the back foot yesterday as global equities rallied after Fed Chair Bernanke’s speech late on Friday and riskier currencies made headway. However, we remind traders to take current price action with a grain of salt as thin summer trade allows moves to be exacerbated and could be reversed very quickly once liquidity returns to normal levels next week.
Nonetheless, this downside break helps affirm our current bullish outlook for the dollar index over both the short and medium term as we explained yesterday and remain convinced that a test of range lows is in the offing. We are wary of the move happening too soon during the thin summer conditions for then it will be unlikely to be sustained when traders return. We prefer the continued steady decline of the index toward the range lows over coming session with the move confirmed when liquidity returns with the potential of a break even below the range lows at 9,320.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.