Bearish sentiment continues for USD index

The bearish picture for the US dollar index has continued this week once again, with Tuesday’s failed attempt to rally adding further downwards pressure to an already negative picture. Indeed this was strongest signal so far this week, with the daily candle ending with a deep upper wick and closing at the opening price, having failed to hold above either the 9 or 14 day moving averages. In addition we now also have two bear cross signals on the daily chart, with the 9 day moving average crossing below the 14 day moving average and the 40 day moving average breaking below the 100 day MA, as we now begin to approach several key technical levels which will dictate the longer term picture for the US dollar, and market sentiment in general.

The first of these is the low of early February at 76.81, and a breach at this level is likely to be followed by a test of the 75.63 level of early November, followed by the 74.17  low of late 2009. If the last of these levels is breached then expect to see the index plunge lower on on towards the 71.79 low of mid 2008.

The weekly chart reflects this bearish picture with the index currently trading below all five longer term moving averages, and with the 9 week having crossed firmly below both the 14 week and 200 week, sentiment remains firmly bearish, and as such we can expect to see the reflected in all the major currency pairs. The 9 week moving average is particularly strong at present, with rallies both last week and this week having run into this key technical barrier.

About Anna 1064 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

7 Comments on Bearish sentiment continues for USD index

    • Hi Joe

      Many thanks for your question and not an easy one to answer, but I will try! My own thoughts are that the euro dollar will continue to remain bullish in the short term, possibly breaking above the 1.4000 region in due course, and possibly testing the underside of the technical resistance ahead in this area, before pulling back. So in short, possibly not as far as 1.43 in the short to medium term, as we can expect to see the US dollar rally later in the quarter. You can read my latest forecasts on FX street, where I am an expert contributor and write about the majors on a weekly basis – so hope this helps and the link is here.

  1. Hi Anna,

    Monday onwards i hope a slight correction on eur/usd pair and most probably it will touch 1.3850 level and may be 1.3750 level. Are You agree or disagree on my stand?

    • Hi Sane – many thanks for your comment regarding the euro dollar this week, and I don’t want to disappoint you, but you may be ‘hoping’ for something that is unlikely to happen in the next few days for several reasons. Firstly the technical picture is firmly bullish, and once we see a break and hold above the 1.4000 level which was touched on Friday during the NFP, then this will add further momentum to the bullish trend, which is also receiving strong support from the short term moving averages. In addition, risk on appetite remains firmly established and with a risk currency such as the euro, this is a key feature, whilst the fundamentals are also supporting this picture. Interest rates are once again becoming the dominant factor, and the sequence of rate rises is likely to be the euro, followed by sterling, and finally the dollar. If this does play out as expected, and certainly based on JCT comments last week, then money flow will continue to be away from the US dollar and into other major currencies such as the euro and the UK pound, with a consequent rise in these currencies against the dollar. This is my own analysis at present, but as always things can change very quickly should events in the Middle East suddenly spook the markets which is entirely possible. However, unless there is a major change, then this is my reading of the market for this week, and I expect to see a test of the 1.4282 in due course, from where we may see a retrace in the longer term. Now you may be right and we could see a short term pullback before the trend continues higher, but at the 1.3850 level there is now significant support in place, so any move lower in the short term will almost certainly bounce off this level. I hope this helps and many thanks once again for getting in touch, and as always good luck and good trading – regards Anna

  2. Hello Madam,

    I am Mr.Sane, I have a typical doubt. In my concept after occur Tsunami, JPY will week and in USD/JPY pair market will move up. As per my own forecast on the beginning stage market move up. But suddenly market reverse and it fell down very deeply. I surprised, and I realize my knowledge was wrong.Madam it’s highly apreciatable, Please correct me on this confussion

  3. My question to you is, In USD/JPY pair, we are buying USD and selling JPY. So when Japan economy is loosing it strength, I expect a up trend in USD/Jpy, But graph is moving continuously down. Why?

    • Hi Joe

      You are correct – it does seem contrarian that the Japanese earthquake should result in a stronger Yen. However, as explained in my post the Yen does traditionally strengthen in March as Japanese companies repatriate their foreign earnings. Furthermore, the markets are already factoring in the rebuilding costs & finally the Yen is also seen as a safe currency, along with the US dollar and Swiss Franc. The BOJ is, however, keeping a very close eye on matters as a strong Yen would be counter productive and damage Japanese exporters. The key level for the pair is now 80 as the BOJ and speculators battle it out. Expect lots of volatility.

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