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TECHNICAL ANALYSIS


Dollar Days

09/28/11 09:23:25 AM
by Austin Passamonte

Here's the midterm outlook for the US Dollar Index.

Security:   DXY
Position:   N/A

During those prolonged quantitative easement government programs, the entire world watched US dollar values steadily plummet while world currencies walked straight up their charts in risk-free trading fashion. But that all changed in the recent past. Where do world valuations go from here?

FIGURE 1: DXY, WEEKLY
Graphic provided by: NinjaTrader.
 
The US Dollar Index (DXY) based from a double-bottom formation just below its 74 level and shot up through a descending trendline resistance in breakout fashion. That bullish pennant formation was tested on a brief pullback before price fired higher from there. See Figure 1.

FIGURE 2: DXY, WEEKLY
Graphic provided by: NinjaTrader.
 
Meanwhile, a Fibonacci extension measurement off the 1-2-3 double-bottom swing shows first measures of resistance hit, with further upside magnets in the 80s to 81 range. A pullback to the 77.75 zone that holds would be the next base from which a higher push should resume. See Figure 2.

FIGURE 3: DXY, WEEKLY
Graphic provided by: NinjaTrader.
 
Then we have prior weekly bar swing points in the 82+ to 83 zone where price action created turning points from 2009, 2010, and early 2011. Markets have memory, even long-term ones when it comes to historical price levels. Look for that channel to magnetize price in the mid- to long-term outloook ahead. See Figure 3.

Despite US government policy that supports a weak dollar valuation, the US dollar remains the reserve currency of last resort until something else replaces it. That is clearly not gold as of yet, proven by the recent rout in gold prices. Unless the European zone creates long-term solutions to its fiscal woes, a DXY rally is probable to continue onward and upward.



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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