US Dollar Index Forecast December 31, 2012, Technical Analysis

The US Dollar Index attempted to rally during the session on Friday, but in the low liquidity failed at the 80 handle. This formed a shooting star, but it should be stated that five of the last six candles before were all hammers. Because of this, we do not put much stock into this shooting star, and as a result still look at dips as a possible buying signal.

However, we must be aware the facts that the so-called “fiscal cliff” talks going on in the United States will more than likely determine where we go next. If there is some type of satisfactory solution, we think this market will continue much lower and a break of the 79 handle on a daily close would in fact be a massively bearish signal. However, it looks like we are more likely to set up a run back to the 81 handle. On a move above 80, we are more than willing to go long.