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USD Graphic Rewind; Dollar Index Rises for First Time in a Week
Written by article default Tuesday, 12 October 2010 08:23
The dollar index rose Monday for the first time in a week, marking the third consecutive Monday it has risen. If this trend of rising on Monday and then falling sharply the rest of the week is anything to go by then we are in for more losses on the index. However, we believe (as we said yesterday) that dollar losses are beginning to slow as the market has finally priced in QE2. The index looks like it may well be in the process of carving out a short-term base, reflective of the short-term top that looks like is being made in the Eur/Usd pair. We will look for the index to climb back to the 78.50 level before calling this a bottom but signs certainly point to this eventuality.
A word of caution however, before jumping back on the USD bandwagon and attempting to benefit from this corrective move. Yesterday’s trade was very subdued do to national holidays around the globe we therefore urge that traders allow trade to return to ‘normal’ today so they can better gauge if in fact a dollar correction is coming or this was simply a day of consolidation during thin trade.
Looking ahead, we have UK and German CPI to keep us busy this morning in Europe before attention shits to the FOMC minutes which are due to be released in the North American session at 18:00GMT. Meanwhile, traders are likely to be moving their focus off the dollar as earnings season gets underway this week in the US stock market.
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