US Dollar Index : Still firmly a dog, but due a technical rebound

The USD Index is the main reason the Baht is strengthening, ditto the SGD, MYR, IDR…all ASEAN currencies apart from the inflation ravaged VND.

There is however a rebound due, and this could be the near term catalyst for a pullback in the likes of gold and silver, with a decent rally in oil, stocks and in the USD against pretty much everything in the currency markets.

If the US end up defaulting – which we view as almost 0%, or more likely, one of the ratings agencies have the balls to downgrade US debt, then we will have the most volatile few days in market trading since the Q1 pullback when the world just started to get used to Arab protests and bloodshed…… 800 or so points on the Dow over 3 weeks.

More likely is a deal and a rally in the dollar, probably from Wednesday or Thursday.



Forex Analysis : USD Index

Another bad week for the US Dollar saw it close at its lowest level since September 2009, with a 75 handle coming soon it seems.

Trade View
• The USD Index has some support at 75.72 or so, and again nearer 75.00,
• With a close at 76.39, use 76.30 as the VST breakdown point, and 76.50 as its first resistance.
• A short term bounce will however need to take out resistance at 76.6 to 76.7, and if this occurs the USD Index may post a dead cat bounce to nearer 77 or so.
• Just think what a further US$ 300bn will do to the Dollar. We suspect many a central bank in the emerging world are already intervening to stem the debasing of the Dollar effect, and if it were not for the chaos in the Middle East and North Africa, news of such would be closer to the front page.

USD Index : Even in war it’s a dog

Risk aversion ? What risk aversion… just look at the US Dollar Index chart below, and it becomes clear there are few takes for the Dollar even with Libya on the verge of civil war. With reports of some supply being cut off from the eastern regions, the USD should bounce a tad, and is a buy in our view at 77.50.

With Bernanke printing several forests worth of paper dollars every few days, we can only imagine how low the USD would be if the Middle East hadn’t blown up. Probably nearer 75.


US Dollar Index (USD)

The US Dollar Index has an inverted head and shoulders pattern forming on its day chart. To say the dollar has been a dog is of course an understatement, but there is hope for a more significant move than seen since the first week of 2011. A breakout above 78.50 would give us a theoretical target at near 80, but we’ll settle for 79.50 or so for now. A daily close below 77.50 will however reduce upside aspirations for the dollar.

If the USD Index does break up, it should send USDTHB to 30.93 to 31.00 quickly, with a decent chance 3130 will be hot before long.