US Dollar Index Forecast October 23, 2014, Technical Analysis

The US Dollar Index broke higher during the course of the day on Wednesday, and now appears to be forming a bullish flag. Because of this, a bullish flag could very well extend itself higher, with a potential target as high as 91. We believe that this market certainly should go higher, and as a result we believe that it’s only a matter of time before we do make that move to the 91 handle.

Remember, the EUR/USD pair is without a doubt the biggest influence on where this market goes. Coincidentally, that pair continues to grind lower and it looks like it’s forming a bearish flag. With that being the case, we believe that this market does continue to move inversely, thereby sending this market much higher. We have had a target of 90 for some time, so we will probably be relatively conservative and aim for that level first, recognizing the fact that there could be a significant amount of noise just above.

Ultimately though, it’s always impossible to sell this market because there is just too much in the way of support below, and too many reasons the think that the US dollar will continue to strengthen overall. With that being the case, we are “buy only” when it comes to this marketplace. We also recognize that the US dollar should leave the spot Forex markets in general, and as a result this chart becomes a bit of an indicator for several of the Forex pairs out there.

We believe in buying dips, as they should represent value in the US dollar, and as long as the Federal Reserve looks likely to taper off of quantitative easing and get out of the game, this market should continue to go higher. On top of that, the European Central Bank looks likely to do monetary policy adjustments to the looser side, which of course works against the value of the Euro, which of course almost by definition brings up the value of the US dollar overall. Ultimately, we do think that this market goes much, much higher.