US Dollar Index Forecast October 1, 2014, Technical Analysis

The US Dollar Index rose during the course of the day, breaking above 86 during Tuesday trading. With that, we pullback and formed a shooting star like candle, and we realize that any move lower from here should simply be a buying opportunity. The market is probably a bit over extended, and as a result pullbacks should be looked at as value entering the marketplace, not as some reason to start selling. We like the look of this market overall, and as a result are very bullish and would buy pullbacks to show signs of support, as well as a break above the top of the aforementioned shooting star.

The US dollar continues to be the favored currency around the world, based upon both rose in the United States and a bit of concern when it comes to the European Union and possible deflation. Remember, the majority of this contract is affected by EUR/USD, and that means that the market will move in the exact opposite direction of that spot Forex pair.

As long as there are troubles in Europe, this market should continue to go higher over the longer term. However, we believe that pullbacks will occur from time to time, as no market moves in one direction forever obviously. The 85 level should be supportive, just as the 84.50 level should be. However, we believe that any supportive candle in this general vicinity should be a buying opportunity anyway.

As long as the Federal Reserve looks ready to taper off of quantitative easing, there’s no reason to think that the US dollar won’t continue to strengthen overall. This is especially true against the Euro and Yen, two of the major currencies in this contract. Both look ready to be sold off drastically against the greenback, so we still like this market overall. It is a nice longer-term uptrend that should continue to the 88 handle given enough time, and then possibly even the 90 handle if things stay the way they have been. Selling isn’t even a thought at this point in time.