US Dollar Index forecast for the week of September 1, 2014, Technical Analysis

The US Dollar Index gapped higher at the open during the Monday session, and then pullback later in the week to find that Supportive. The candle for the week that had formed is a hammer, and that of course suggests that the market is going to go higher given enough time. That being the case, the market should continue to be one that can be bought on dips, and we believe that it is ultimately aiming for the 84 handle. Because of this, we have no interest in selling this marketplace, as we believe that the US dollar will continue to be one of the more favored currencies out there. This is because the US economy seems to be the strongest of the major ones at the moment, therefore this will continue to go higher.

On top of that, remember that the EUR/USD pair makes up 40% of this contract. Because of that, this market almost always moves in direct negative correlation to the EUR/USD pair, meaning that it rises when the EUR/USD pair falls. With that, the market should continue to strengthen because of the fact that the Euro is so much reviled at the moment. We believe that the markets will continue to sell the Euro, and as a result this market should continue to go higher in simple reaction. However, we also recognize the fact that there is strength in the United States overall, so that being the case this market continues to look better as the markets digest better than anticipated numbers out of North America, and worse than anticipated numbers out of Europe.

If we do pullback from here, we believe that there should be a significant amount of support near the 81.50 level, which is where we just recently broken out of. Because of that, we believe that the buyers will try to enter the market at that area if we get down there. On the other hand, we may not do that, and simply go higher from here. Either way, we are buyers and have no interest in selling.