Dollar Index Weekly Analysis – WC 17th Dec
- The USD could potentially remain under pressure heading into next week. This comes as as the dollar index bulls have given back recent gains - unable to exceed the prior week’s high - and the USDX dropped below the 79.58 level during late trading on Friday (see fig-1 below). This came as the greenback dropped for a fifth consecutive day versus the euro.
- USDX 80.00 failed to provide sufficient support and the psychological round number level is now eyed as a a potential resistance area on any corrective upside move; further to this is the 80.58 – 80.65 zone which has capped price for three consecutive weeks.
- The dollar index now looks vulnerable to the downside and the 78.55 area prior support zone is once again in focus; this area held the index as robust support in March, April and September this year.
- The European single currency and Japanese yen are the most significant currency counterparts when referencing the dollar index basket of currencies – with a 57.6% and 13.6% weight respectively. The latest COT report update shows large speculators were marginally less short on the key EUR FX (CME) futures contact with a 32K reading versus the prior 33K; the JPY net short position is at an extreme long 94K versus the previous week’s 90K level.
- Large specs had an increased short USD aggregate wager from $818 million to $3.2 billion according to the latest data from the CFTC (Commodity Futures Trading Commission).
- We also note the EUR/USD pair took out the September 17th 1.3171 high (by a pip…) to reach 1.3173 late on Friday – this is the highest level seen since May for the key currency pair and price action heading into the new week could help provide a near term bias from this significant technical area. USD/JPY came within 22 pips of the 15/3/12 previous swing high before losing momentum late Friday, and edging down below the daily open, to print the first lower close in four days.
Dollar Index Weekly Chart – fig 1
Dollar Index Daily Chart – fig 2