USD Graphic Rewind: Dollar Index Points to Short-Term Base; We're Not Buying It | Learn Forex | GoLearnForex.com

The dollar index came out of the over-night Asia/Pacific session well bid in the aftermath of the killing of Osama bin Laden by US forces in Pakistan. However, this bid tone was not to last and already early in Europe the greenback had begun to fade. The index was drilled to its lowest levels sicne July 2008 after a soft US ISM manufacturing reading but managed to rebound relatively quickly as US equities slipped into negative territory. The lower close on US bourses helped prop the buck into the Asia session over-night, but we are seeing exactly the same price action play out again this morning whereby the buck is losing its over-night momentum.

Ordinarily we would look at this daily chart of the dollar index and suggest that it was basing out and a short-term base could be forming, with initial resistance coming in around 74.00 and then 75.00. However, with the current trend in the market we are cautious to make any such assertions despite the charts forming so clearly. As long as USD selling is in vogue then it is something of an exercise in futility to look higher in the dollar index. We, therefore, remain in the bearish camp for the near-term outlook for the buck, but do believe that we are inching closer to a reversal point.

Written by Jonathan Granby, DailyFX Research Team