Amid Murky Outlook Trading the Range is Best Play | Learn Forex | GoLearnForex.com

As the turmoil continues to roil the markets and direction changes in a matter of moments we continue to take a back seat we very little directional bias for the Dow Jones FXCM Dollar Index (ticker: USDollar). We discussed on Monday the breaking of the two key trends that we had been watching; a rising trend line of support and the series of lower tops, to little real effect in the index. As such we prefer to look at this zoomed out daily chart where we think the index remains in relative ranges despite the constant changing of direction.

After posting lows back in early May and its rebound corrective high at 9770 the dollar index has largely consolidated and traded in a loose 9450-9750 range and until we see a clear break of these levels we elect to trade the range, but with caution, with tight stops above or below critical levels so as not to be wrong-footed by a breakout move. This range bound trade we believe is indicative of the broader fundamental situation at the moment around the world as quantative easing is wound down, growth slows, the EU and US struggle with debt problems and China tackles white-hot inflation major players are simply uncertain what is going to happen next and therefore are reluctant to take large positions without true convictions. As the picture becomes clearer we, like everyone else, will form a directional bias but at present we believe range bound trade is the name of the game.

Written by Jonathan Granby, DailyFX Research Team