US Dollar Index forecast for the week of October 20, 2014, Technical Analysis

For the second week in a row, the market in the US Dollar Index Futures contract fell, but found support at the 85 handle this time. Because of this, we have formed a hammer, and it looks like the buyers could come back in. However, we are bent concerned at this point in time because the market has moved so high so quickly. That being the case, we may see a bit of sideward action. If we do fall from here though we anticipate that the 84 handle should be supportive as well. If you are patient enough, you may get a long-term buying opportunity but we do not anticipate the same kind of momentum to the upside that we have had recently.

That being said, the US dollar remains by far the most favored currency out there in the Forex markets, and we do not see that changing. Remember, a majority of the factors in the US Dollar Index contract comes down to the EUR/USD pair. With the Euro struggling in general, it’s hard to imagine that this market will meltdown anytime soon. Because of that, we are very bullish of the US Dollar Index, but recognize that there will be pullbacks from time to time in that we have certainly been overbought for some time.

That being said, we are looking for reasons to go long of this market from a technical basis. We believe that the market recently broke out of a reasonably large consolidation area, and allows and affords this market to go as high as 90 given enough time. With that, if you are patient you should continue to realize profits in this market to the upside, and we certainly have no plans whatsoever of selling. In fact, we don’t even have a scenario at the moment where we can imagine doing so. With that, we are very bullish but recognize that patience will be needed with anything at this point in time, simply because we are made such a massive move in such a short time.