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US Dollar  - USD Changing Its Tune?

US Dollar - USD Changing Its Tune?

Kristian Kerr, Sr. Currency Strategist

Price & Time covers key technical themes daily and can be delivered to your inbox each morning by joining the distribution list: Price & Time

Talking Points

  • USD back at 200-day moving average
  • Important downside break looming?

US Dollar - USD Changing Its Tune?

US Dollar  - USD Changing Its Tune?

Is the FXCM US Dollar Index (equally weighted basket of USD versus EUR, JPY, GBP & AUD) changing its tune? Since August of last year, there have been four undercuts of the 200-day moving average. In August, September and October when this occurred the close back over the moving average was followed by an almost immediate push back to new highs. The same thing looked to be going on last month after the index settled below the moving average on the 11th and then closed back over it on the 12th. Like in the prior episodes, the dollar rallied steadily after doing this for a couple of weeks, but failed well shy of the old highs and is now very close to challenging the 200-day moving average yet again.

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This is precisely what I find troubling as it suggests that the fairly reliable bullish behavior that we have all gotten accustomed to over the past couple years if finally changing. Another clear break of the 200-day moving average from a lower high so soon after having successfully rebounded from it would be a very clear negative technical development that risks opening the downside floodgates - especially if the 200 day starts to act as resistance! It does not help that the price action over the last four months could easily be construed as a head & shoulders top with implications for an eventual move towards 11,700. The index needs to get back above 12,160 (in a hurry) to undermine the burgeoning negative technical picture.

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--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter @KKerrFX

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

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