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TECHNICAL ANALYSIS


The Euro And The Dollar, Midterm

04/27/11 01:11:41 PM
by Austin Passamonte

Here's a midterm outlook for the euro and the US dollar index futures.

Security:   DXY, 6E
Position:   N/A

It's safe to say that anyone with any kind of access to world media has been bombarded with US dollar crisis news. Dollar keeps diving lower as all asset classes keep surging higher, foreign currency markets and quasicurrency markets alike. Is there a visible end to the USD rout? Or is the greenback hopelessly bottomless?

FIGURE 1: EURO FUTURES (6E), WEEKLY
Graphic provided by: NinjaTrader.
 
Euro futures (6E) broke out of a two-year wedge formation to the upside (Figure 1). It also broke above and retested on a quick pullback of the widely watched 1.42 level in the process. That remains a magnet of distinction to monitor if and when further pullback tests materialize.

FIGURE 2: US DOLLAR INDEX, WEEKLY
Graphic provided by: NinjaTrader.
 
Meanwhile, the US Dollar Index (DXY) failed to hold a triple-bottom test of its 75-76 zone as price melted right through on its way to lower lows. This year's long magnetic zone has now flipped from long-term support to resistance mode. Unless the index breaks back above in rapid fashion, it may flounder below there for quite some time. See Figure 2.

FIGURE 3: US DOLLAR INDEX, MONTHLY
Graphic provided by: NinjaTrader.
 
A monthly chart view of DXY shows the lowest recent lows from the depth lows (and peak highs of stock markets) in 2008 are within easy reach of being pegged from here. At that time markets were in parallel fashion: complacency in stocks, panic in currencies. See Figure 3.

The next several weeks ahead are likely pivotal times in all financial markets. Real inflation is pushing everything across the spectrum upward -- the sole basis for that broad-based levitation being USD pressure. Any steps taken or even hinted to interrupt or stall that continuation will most assuredly see violent v-turn price moves in all asset classes currently ramped higher at this time.



Austin Passamonte

Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum

Title: Individual Trader
Company: CoiledMarkets.com
Address: PO Box 633
Naples, NY 14512
Website: coiledmarkets.com/blog
E-mail address: austinp44@yahoo.com

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