Dollar Index Just Below Key Medium-Term Resistance; Break Looks Imminent
As the Dow Jones FXCM Dollar Index (ticker: USDollar) consolidates its recent run higher in the 9,550-9,650 region we believe that price action in the next few sessions will be decisive in seeing if the index can make a run toward range highs at 9,770. We have identified a medium-term trend line coming off highs back in February which the index is trading just below, a break and close above this resistance could help inspire the topside break we have been forecasting in recent days.
While some consolidation is to be expected after the index’s sharp run higher which has shifted back to the topside we believe that with Greece, and the EMU, coming under increasing pressure to stablise their economies the buck is well positioned to benefit. We pontificated in recent comments about how the greenback also stands to benefit from the effective neutering of the Swiss franc and Japanese yen by their respective central banks as safe haven plays which leaves on the US Dollar and gold as viable safe haven plays. We are really getting behind the idea of a topside break sometime soon and a sustained topside move back toward 10,000 as we head into Q3. We must note the only thing on the radar at present that could negate, or at least challenge, this outlook is talk of QE3 which could serve to devalue the buck as the Fed starts the printing presses again.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.