US Dollar Index Forecast August 20, 2012, Technical Analysis

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The US Dollar Index had a relatively quiet session on Friday although it did gain somewhat. In fact, the entire trading range of the last two weeks has been very flat. However, we should keep in mind that we are currently at the bottom of the uptrend channel, and as such we are facing quite a bit of support in this general vicinity. Also of note is the fact that we are in the height of the vacation season for large firms right now, and as such the volumes are probably a bit lower than usual.

As long as is channel holds, we are bullish of the US dollar but understand that there will be quite a bit of volatility in the near term because of all of the issues going on around the world. The “flight to safety” trade could begin at any time as there are issues in places like Iran, Europe, and several other hot spots around the world. When currency markets get concerned, they by the US dollar. This is essentially because there will be a flight into the US treasury markets, which of course are priced in US dollars.

We see that there just far too many potential negative headlines out there to believe that the US dollar is suddenly going to get crushed. In fact, we think that the US dollar can rise quite a bit higher than we are currently seen. It certainly can retain the shape of the channel in the near term, and as such we think that prices near the 84.50 level are certainly plausible.

In order to start selling the US dollar, we would have to see a break below the 81.50 level as it would show a significant shift in momentum. It is at this point that we would begin to enter a lower consolidation area, and as such we think we could fall as low as 79 if we do manage to close below the above-mentioned 81.50. In the meantime, we are bullish and expect a break of 83 to lead all the way up to 84.50 before running into serious resistance.

US Dollar Index Forecast August 20, 2012, Technical Analysis

US Dollar Index Forecast August 20, 2012, Technical Analysis

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About:FX Empire Analyst - Christopher Lewis

Christopher is a part of the FXEmpire.com analysis team. He writes Forex and Commodities technical analyses on daily and weekly basis. Christopher writes his analyses in a professional and yet simple to understand manner. His analyses are available in both text and videos.

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