USD Graphic Rewind: Looking for Confirmation of Bullish Dollar Index Outlook | Learn Forex | GoLearnForex.com

Dow Jones FXCM Dollar Index, Created using Bloomberg

We are stepping back to look at the daily chart today to try and asses where the dollar index is headed. As we can see the index has bounced off rising trend line support off the April lows and looks set to climb until at least initial resistance from the May highs by 9765. To maintain a bullish bias on the index we need to see the dollar index confirm this higher low and go on to post a higher high above these highs. As Greece looks like it is circling the drain and headlines about restructuring, reprofiling and all manner of other debt ideas to help Greece manage their deficit the euro is likely to remain under steady pressure.

We are encouraged by the topside failure in the euro yesterday ahead of key resistance by 1.4500 and will now look for the euro to extend declines confirming the lower high as it prepares to resume its downside move. While there are certainly tremors in the market regarding US growth prospects, especially ahead of NFPs tomorrow, and this could make trade volatile but the bottom line remains; the EMU periphery nations have no growth prospects but default prospects and as much as anyone wants to knock US growth prospects it isn’t anywhere near as bleak as that of the EMU. We therefore remain bullish on the index in the near term and look for a break towards 9800 to confirm. A close below the rising trend line support negates this outlook.

Written by Jonathan Granby, DailyFX Research Team