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Can The U.S. Dollar Index Make An Upleg?

10/07/03 11:46:40 AM
by Gary Grosschadl

As the markets surged upwards last week many traders were anticipating the USD to follow with its own bounce.

Security:   $USD
Position:   N/A

Last Friday the USD did make a bullish move and gold traders took the brunt of it as the price of gold plunged nearly $14 (a six year record). Some traders are likely hoping for a double bottom attempt on this daily chart of the USD but taking a closer look at some technicals brings a more sobering view.

Last June it took several weeks for a bounce off the bottom to occur and several signals verified that the upmove finally happened. The magenta arrows show where these occured. From top to bottom they are: DI crossover on the directional movement indicator, an Aroon 20 cross, a 10/20 moving average cross, a price relative to $SPX crossover, a MACD (moving average convergence/divergence) crossover, RSI (relative strength index) moving above the 50 level, and lastly a stochastic move above the 20 region.

Daily chart of the U.S. Dollar Index.
Graphic provided by:
Presently none of these signals have yet to be triggered so the move up has yet to be convincing. Also note the gap resistance at 94.4. There is likely to be significant resistance at this point again. So even if the USD manages to move up, it may not amount to much of a run.

Traders should not read too much into this very early upturn as it may not last. Repercussions could include another bearish reversal for the main equities indices and possibly a bullish reversal for the gold sector. Further proof is required that this potential bullish run has any staying power. The markets remain volatile and reversal oriented as they have been for quite some time.

Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

E-mail address:

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Date: 10/08/03Rank: 4Comment: 

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