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Technical Analysis - Dollar Index - Breaks higher

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By William Adams, Head of Research william.adams@fastmarkets.com +44 (0)20 7929 6339
Short term: Medium term: Long term:
Resistances: R1 R2 R3 R4
80.74 Former high
80.86
81.31
83.56
Support: S1 S2 S3 S4 S5 S6
79.84 Former peak
77.91 Support
76.45 Key support
74.71
73.45
72.70
Stochastics: Bullish
Legend: 
DTL = down trend line
UTL = up trend line
SL = support line

Analysis

  • The dollar index is rising strongly - it has cleared recent highs at 80.74.
  • The next target and former peak is 81.44.
  • The stochastics continue to show strength so further gains seem likely, which is likely to prove a headwind for metals.
  • Outside of the technicals, concerns over EU debt are leading to a flight to safety. This is channelling money into the dollar for now; however, at some stage we would expect money to also move back into bullion because it may dawn on the market that the US has its own debt and deficit problems as does Japan, which is another country with a stronger currency.

Conclusion

The dollar is pushing higher and for now that looks set to continue but we feel the rally might not be built on solid foundations
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