9 Aug 2013
DXY finishes off the lows but still has more to go to reach key support
FXstreet.com (Barcelona) - With the help of strength in the “major” currencies, the US Dollar Index (DXY) continued its bearish ways – finishing below the midpoint of the day’s range and below 81.13 support. The 80.50 – 80.71 range is next.
Is it Dollar weakness or strength everywhere else?
It cannot be Dollar weakness, can it? Seeing as the Fed Heads have gone out of their way to talk up rates recently, even if they were less than effective overall, we shouldn’t be seeing actual weakness in the Dollar. No chances are that what we are seeing is a “delta” or “rate of change” trade going on in several currency pairs – including the USD/JPY, GBP/USD, AUD/USD, EUR/USD and USD/CHF. The economic conditions in non-US countries is probably not any better than the US – but the “delta” or rate of improvement (off of a lower base) is higher than the US for the time being. Nobody knows exactly how long such a "delta" trade will last, but it will become harder over time for the various "major" countries to keep up their positive rates of change.
In addition to the various "delta" trades affecting the DXY, the Dollar’s own potential strength is likely to be kept in check until Mr. Bernanke comes out publicly and gets behind the proposed “tapering” program that his colleagues have been promoting recently.
Technical outlook for the DXY
Technicians say the downside trading target for DXY may now be 80.51 after 81.13 support was broken. Once the anticipated low is established, technicians are calling for a sharp move to the upside with an ultimate target of at least 85.00. Shorter-term resistance for DXY comes in at the 7/31 closing low at 81.45 and is backed up by the 7/24 peak at 82.42.
Is it Dollar weakness or strength everywhere else?
It cannot be Dollar weakness, can it? Seeing as the Fed Heads have gone out of their way to talk up rates recently, even if they were less than effective overall, we shouldn’t be seeing actual weakness in the Dollar. No chances are that what we are seeing is a “delta” or “rate of change” trade going on in several currency pairs – including the USD/JPY, GBP/USD, AUD/USD, EUR/USD and USD/CHF. The economic conditions in non-US countries is probably not any better than the US – but the “delta” or rate of improvement (off of a lower base) is higher than the US for the time being. Nobody knows exactly how long such a "delta" trade will last, but it will become harder over time for the various "major" countries to keep up their positive rates of change.
In addition to the various "delta" trades affecting the DXY, the Dollar’s own potential strength is likely to be kept in check until Mr. Bernanke comes out publicly and gets behind the proposed “tapering” program that his colleagues have been promoting recently.
Technical outlook for the DXY
Technicians say the downside trading target for DXY may now be 80.51 after 81.13 support was broken. Once the anticipated low is established, technicians are calling for a sharp move to the upside with an ultimate target of at least 85.00. Shorter-term resistance for DXY comes in at the 7/31 closing low at 81.45 and is backed up by the 7/24 peak at 82.42.