USD Index Daily Chart 18 Oct 2010
The usd index closed on Friday with a relatively deep hammer candle suggestive of a possible short term bounce higher for the index but one which is unlikely to produce anything other than a short term retracement rather than a longer term reversal. Friday’s candle followed that of Thursday, a small doji cross candle and, as such, also indicated a potential pause point in the downwards trends, which has indeed occurred in this morning’s forex trading with the index trading marginally higher at 77.37 at time of writing. However, the medium term outlook for the index remains firmly bearish as we continue to trade below all four moving averages, and despite this morning’s gapped up open, which has leap frogged the 9 day moving average, resistance from the 14 day is now kicking in and appears to be presenting a barrier to any upwards movement. Above the 40 day average is still pointing sharply lower and with the 200 day average now horizontal and about to turn lower, this can only add further pressure to the downside. Any break below the 76.14 intra day low of Friday will signal a further move to the downside and once clear of this region the 74.17 of late 2009 awaits.
USD Index Weekly Chart 18 Oct 2010
It is interesting to note that on the weekly chart that the index closed as a long leg doji and, as such, is a further key signal that the index may be looking to reverse higher in the short term. We could therefore see a bounce this week but this is unlikely to breach the 200 week moving average which now sits in the 79.916 area and with the 9 week average now crossing this indicator this is adding a further bearish layer of sentiment for the US currency as a whole.
