Dollar Index Analysis – Bullish Outside Week In Focus - 10th Dec
- When referencing the dollar index weekly time frame chart below (Fig 1) we see the USDX has formed a so called “bullish outside week“. These patterns form when a candle closes higher than the open, having completely engulfed the previous candle.
- Price had moved as low as 79.58 on Wednesday prior to paring back earlier losses and closing around 23 pips higher on the weekly basis. The USDX is now above the 80.00 handle once again.
- A sustained break above last week’s high opens up a potential move back towards the 50% corrective level. Prior to this is the descending trend line area which is located just above last weeks high.
- Any initial downside may see the 80.00 area providing an element of support, as was the case on the week commencing 25th November.
- An alternative view is a failure to sustain the upside momentum – seen from last Wednesday onwards – with a subsequent move below the 79.58 area. This would invalidate any upside bias gained from the bullish weekly price action noted above.
- Dovish ECB rhetoric was largely responsible for the downside move on the EUR/USD last week. The European common currency is now trading well below the 1.3000 handle (1.2925 weekly close). Any shift in sentiment and subsequent move back above the 1.3000 handle would likewise have us questioning the current near to mid-term bullish dollar directional bias.
- We also note that large futures speculators from the CME (Chicago Mercantile Exchange) moved back into a net short USD position according to the latest COT report update. However, the data did not capture the dollar strength seen from Wednesday onwards.
Dollar Index Price Action Update – WC 10th December – (Fig 1)
Dollar Index Price Action Update – WC 10th December – (Fig 2)