The U.S. Dollar at Key Level

The U.S. Dollar Index weakness has become a well-known and often-discussed news item.
The weakness is such that it has crosses the chasm from active traders and into the consciousness of casual market observer.

The daily chart tells a better story though. The level prices have reached on the daily chart of the U.S. Dollar Index is going to be a key to where it goes from here. This pause in the market is a result of a bounce from the 81.25 low — it seemed that the bears lost the taste for a weaker Dollar as prices approach 81.00- and the bulls ran as far as they could trading up to 82.00. The 82.00 psychological level has been the battle ground ever since. Now I am sure there is a whol host of fundamental, political, and import/export considerations for the move but bottom line is that 82.00 still seems to be where prices gravitate. What makes this week’s price action probably as important as the support between 81.00 and 81.25 is the fact that the Dollar has begun the most meaningful consolidation it has had since the initial drop began in February.

Chart created with eSignal 8.0 and EZ2Trade Charting Collection plug in (www.ez2tradesoftware.com)

There are a number of cues on the daily chart. First the “00” of 82.00 is the line in the sand. The Wave has leveled out to signal a consolidation/congestion market cycle which is the first since the downtrend began in February. The last two candle on the chart are of the most interest to me. Both these candles show a bounce from the 82.00 level. Bother are very tight ranged candles as well — telling me that there is a balance in the tug of war between the bulls and the bears as all short bodied candles indicate.

The climb from here, from above 82.00 is not certain and the resistance waiting between here and 82.50 is significant. But the rally and pause and now sideways market is the set up for the next move…up or down.

Raghee Horner is
an trader with more than 15 years’ experience in the markets. Ms. Horner has
taught her brand of technical analysis and charting strategies to students all
over the world. She is also the author of the bestselling “Forex Trading for
Maximum Profit” and “Thirty Days of Forex Trading”. Emphasizing charting and
price action and continues to teach the tools and strategies that encourage
self-directed traders to pursue the study of chart analysis and market
psychology. She is a much sought after public speaker who has conducted seminars
in the US, Canada, the Caribbean, and Asia. For more information on Raghee’s
analysis and trading email cs@raghee.com or
visit www.raghee.com.