Dollar Index Technical Analysis 15/5/2012
- The USDX continues to trade near the weekly range highs after a strong daily close on Monday. Price is now consolidating recent gains and is near flat on the day with a 0.09% drop at present. It is no surprise to see a small reaction to the downside as this area has proved to be a price pivot on numerous previous occasions.
- The highly weighted (in terms of USDX) EURUSD pair staged a brief rally this morning, from the Frankfurt/London open; the euro/dollar rate is now testing 1.2840 intra-day support after giving back much of the earlier gains.
- Strength in USD during these ‘risk-off” times is often attributable to investors buying treasuries to protect their principal investment. As speculators move towards US Treasuries, prices typically move higher. As prices and yields are inversely related , yields move lower. With this in mind we can see that Benchmark 10-year notes have gained in price to yield 1.769%, this is the lowest level seen since October.
- Gold is close to major price structure support; any strong upside reaction from the precious metal should be monitored as the negative relationship between gold and the US Dollar can often give a hint as to potential dollar movement . Price is now close to the $1530 area which has provided tremendous support when last visited.
- Any breakout above the 80.75 area may see dollar-x bulls target the 81.77 previous high. Price has however moved to the upside with little retrace and may be due a corrective pullback before potentially heading higher. Initial support may be seen at the 80.00 level in the event of a retrace for the USDX.