US Dollar Index Forecast

Frankfurt (Feb 12)  The US Dollar Index fell during the better part of the session on Tuesday, but found the 80.50 level as supportive again. Because of that, we bounced and formed a hammer, and this could be partly due to Janet Yellen suggesting that the Federal Reserve was still on track to continue to taper. With that being the case, the Federal Reserve and the United States are essentially the “lone Wolf” when it comes to tightening. Should naturally provide a boost for the US dollar over the longer term, and as a result we are very bullish of this index now.

A break above the top of the hammer is a buy signal as far as we can tell, and should send this market looking for the 81.25 level. Above there, we believe that there is a certain amount resistance all the way to the 81.50 handle, but eventually this market will break out and aim for the 82.50 level, a move of an entire cent. With that, it’s very likely that we will see continued strength, but do recognize the fact that there will be a lot of back and forth position in and choppiness on the way up. After all, there is a lot of noise just above current levels.

We believe that ultimately there is massive support at the 80 handle as well, so even if for some reason we did fall from here, we believe that buyers will step in and take advantage of perceived of value. Besides, you have to think where else would you want to put your money right now? That’s the biggest problem really, as there is nowhere to invest at the moment that feels “safe.” The one possible exception might be Germany, but Germany’s biggest problem is that it’s in an economic union with other countries that are doing so hot.

With that being the case, we are buyers on dips, and a break of the top of the hammer as well as breaking out above the aforementioned resistance levels which of course would show continued bullish momentum.

(Source:  FXempire)