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US Dollar Index Forecast December 21, 2012, Technical Analysis

By:
Christopher Lewis
Updated: Aug 21, 2015, 01:00 UTC

The US Dollar Index fell during the session on Thursday, but found support at the 79 level. This area caused a bounce that formed a nice hammer, and this

US Dollar Index Forecast December 21, 2012, Technical Analysis

The US Dollar Index fell during the session on Thursday, but found support at the 79 level. This area caused a bounce that formed a nice hammer, and this will have served as notice that the buyers are stepping in and supporting this market currently. This is exactly the type of candle that you want to see if you expect this market to continue higher overall.

Because of this, we feel that this is a bit of a “binary trade”, and as a result it’s a very easy set up for us. We think that buying a break of the top of the hammer is a reasonable place to take a long position, as there are a couple of different things that line up well for it. For example, if we managed to break the top of the scandal it shows that the buyers have in fact repelled selling at the 79 handle. However, if this trade goes against his and we break the bottom of the hammer from Thursday, this shows significant bearishness that not only breaks through a reasonably strong support level, but also breaks the bottom of a hammer at the same time. Because of this, if we get a daily close below the 80 handle, I expect this to be a brutal selloff.

Today will be a very interesting session, as the liquidity in the marketplace is deftly dwindling. With this being said, the moves could be rather a rally, and possibly very swift. This could be a symptom of the “risk off” trade coming back as the “fiscal cliff” talks continue to stall and Washington DC, which of course will bring have a get to the marketplace if there is no solution agreed to.

If this happens, in a twist of irony the US dollar will be purchased as people buy treasury bonds trying to shove those cells from the upcoming recession in the United States. If there is a deal struck though, we could see the US dollar fall in value against most currencies, and by extension fall in this contract. However, we still have a few days of the Congress can get together and do something, and as such we need to see some type of deal soon, or the Dollar will certainly gain.

 

US Dollar Index Forecast December 21, 2012, Technical Analysis
US Dollar Index Forecast December 21, 2012, Technical Analysis

About the Author

Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.

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