The USD index continues to remain rangebound on the daily chart and appears to show little sign of breaking out of the its narrow trading range which has been in place since early September 2012. Indeed, since the start of the trading year the price action has narrowed still further with the upper limit of resistance now at 81 defined by an isolated pivot high and the lower limit of support at 79.40, also defined by an isolated pivot.
The significance of this type of price action cannot be under-estimated and indeed as I have outlined in several previous market forecasts, when price action moves in this way like a coiled spring when a breakout comes it will be both volatile and explosive. At present it is impossible to forecast the likely direction of the breakout and all we can do is continue to monitor and analyse the price action and associated indicators.
Moving to our indicators our three day trend has remained firmly bearish throughout this phase since its transition in early December 2012, suggesting that any breakout for the medium term is likely to be to the downside. In addition whilst there was some limited buying volumes on both the daily and three day charts, the general sentiment for the USD index has either been selling or no demand volume. Indeed, there is little to suggest that buyers are willing to enter the market at present either in terms of the price action or indeed rising volume.
Finally, the heatmap has transitioned away from bullish and now appears to be moving back to reflect bearish sentiment which is in line with the daily trend which has also transitioned back to white.
By Anna Coulling