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US Dollar Maintains Ascending Channel Trade- Index Hits 6 ½ Week High

US Dollar Maintains Ascending Channel Trade- Index Hits 6 ½ Week High

2011-05-23 21:42:00
Michael Boutros, Technical Strategist
Share:
US_Dollar_Maintains_Ascending_Channel_Trade-_Index_Hits_6_Week_High_body_Picture_1.png, US Dollar Maintains Ascending Channel Trade- Index Hits 6 ½ Week HighUS_Dollar_Maintains_Ascending_Channel_Trade-_Index_Hits_6_Week_High_body_Picture_7.png, US Dollar Maintains Ascending Channel Trade- Index Hits 6 ½ Week High

The greenback surged throughout North American trade today as heightened risk aversion flows saw traders seeking haven in the safety of the dollar. The Dow Jones FXCM dollar index advanced 0.95% by the close of trade in New York, having moved 107.7% of its average true range. The ascending channel that has held the index since April 28th remains intact after a brief break below the lower bound support line on Friday. The index quickly pared losses, breaking back above former trendline support at 9650 as global equities fell across the board with the Dow, the S&P, and the NASDAQ closing off by 1.05%, 1.19%, and 1.58% respectively.

US_Dollar_Maintains_Ascending_Channel_Trade-_Index_Hits_6_Week_High_body_Picture_10.png, US Dollar Maintains Ascending Channel Trade- Index Hits 6 ½ Week High

A daily chart of the US dollar index witnesses a breach above the 50-Day moving average followed by a close above the 38.2% Fibonacci retracement taken from the November 30th decline at 9728. Topside targets are held at the 50% retracement at 9840. Gains for the greenback in the next 24-hours may be tempered as relative strength approaches overbought territory, suggesting the index may see a short-term correction before continuing its advance. Interim support is eyed at 9590, backed by 9520 and 9460.

US_Dollar_Maintains_Ascending_Channel_Trade-_Index_Hits_6_Week_High_body_Picture_4.png, US Dollar Maintains Ascending Channel Trade- Index Hits 6 ½ Week High

A glance at the component currencies sees the aussie suffering the steepest declines, off 1.44% at the close of trade for a move of 127.5% of its average true range. The euro was the second worst performer against the greenback today as ongoing European sovereign debt concerns mounted after last week’s rating downgrades of Greek and Italian debt. With confidence in the euro faltering, the single currency will remain on the defensive, with euro targets held at the 38.2% Fibonacci extension taken from the May 4th and 20th crests at the 1.40- handle.

Looking ahead traders will be eying April new home sales data out of the US tomorrow with consensus estimates calling for a gain of 1.7% m/m, down from a previous print of 11.1% m/m. The data is followed by the Richmond Fed Manufacturing index at 14:00GMT, with expectations calling for the gauge to hold with a print of 10 for the month of May.

GMT

Importance

Release

Expected

Prior

13:50

LOW

Fed's Hoenig, Plosser Speak on U.S. Housing Market

-

-

14:00

MEDIUM

New Home Sales (APR)

305K

300K

14:00

MEDIUM

New Home Sales (MoM) (APR)

1.7%

11.1%

14:00

LOW

Richmond Fed Manufacturing Index (MAY)

10

10

17:20

LOW

Fed's James Bullard Speaks on U.S. Economy

-

-

Written by Michael Boutros, Currency Analyst for DailyFX.com

To contact the author of this report or to subscribe to his daily analysis please sends inquiries to: mboutros@dailyfx.com

You can also follow Michael on Twitter @MBForex

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

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