US Dollar Index Forecast August 26, 2015, Technical Analysis

The US Dollar Index bounced off of the 93.50 level at the open on Tuesday to take back some of the losses. At this point in time, if we get above the 95 handle, we feel that this market will continue to go much higher. We will wait until the daily close in order to make that decision, and as a result we will have to show some patience. If we can get above 95 and stay above there, we think the market will probably head back towards the 97 handle. However, if we find a resistive candle in that same region at 95, we may be looking at a potential break down at this point in time.

The US dollar was absolutely pummeled on Monday after showing some softness the previous couple of sessions. There is a certain amount of concern as to whether or not the Federal Reserve can hike interest rates at this point in time. After all, the economic announcements around the world, the United States included, show little bits of softness. That softness of course keeps the market from being able to absorb higher interest rates in theory, and as a result a lower interest rate creates less demand for the currency. The industry differential in the bond markets continues to favor the US dollar over some currencies, but quite frankly that’s interest-rate differential has taken a significant be down recently as the expectations are starting to slip. We believe that it’s only a matter of time before we get some type of certainty, and this week is typically the one that traders come back from vacation to start pushing markets around again. With this, we believe that patience will be needed, but it is probably only a matter of time before a real move occurs, and we can go ahead and start following it.

With this, we believe that the 95 level is crucial. Sometime by the end of the week, we could have a little bit of clarity, and we definitely think that could be the case next week. In the meantime, we continue to watch 95 as to which direction we should be trading.