All signs now point only one way; UP. The Dow Jones FXCM Dollar Index (ticker: USDollar) made hefty gains on Friday to close the week sharply higher as the euro collapsed across the board with the market speculating that a Greek default is imminent. With Greece seemingly unable to meet the conditions of its bailout, ie fiscal consolidation targets, the EU/IMF may render the beleaguered nation unworthy of the next troika rendering Greece bankrupt. In addition to these concerns a senior ECB member, Stark, announced his resignation from the ECB governing council on Friday making mention of irreparable disagreements about the buying of EMU periphery debt by the ECB. The concerns of internal ECB problems weakening the ability of the central bank and worries about Greek solvency saw the euro fall below key support at 1.3635 and Friday and near the psychological 1.3500 level this morning.
The result for the index has been one-way trade higher moving away from the medium-term resistance we discussed last week and above key range highs early this morning. The break of these highs essentially now opens the door for a climb toward the 10,00 mark. With the euro in a quagmire of debt that simply wont go away, the Swiss franc neutered for its safe haven appeal and the Japanese yen exposed to more – possibly coordinated – intervention the greenback is well positioned to rally sharply higher in coming sessions, days and weeks. We really can only see money flowing in one direction; into the buck and as such are very bullish about the index’s topside prospects.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news on the economic reports and political events that influence the currency market.
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