A look at the U.S. Dollar Index to Start the Week

• ragheehorner
• October 26th, 2009

The U.S. Dollar continues to head lower as the daily chart maintains its weak but still-valid mark down cycle.  The 75.00 major psychological level is the line in the sand between support for a foundation or lower lows.  The last time prices were at this level was 8/11/2008.

This big picture view is not necessarily the chart by which most traders will gauge forex pairs by and while it may be the view of the overall psychology of the dollar it’s not the only view.

By the way, my market pulse charts include the U.S. Dollar Index, crude oil, Continuous Commodity Index, gold, and the Dow Jones.  One thing I will advise to all forex traders now, most especially those who trader dollar-correlated pairs (e.g. EUR/USD, AUD/USD, USD/JPY, etc.) is that you cannot ignore the futures market’s impact on the forex.  I have always considered myself lucky for having been predominantly a futures trader for well over a decade before I began trading forex as well.

The other views to consider should correlated with you other trading time frames.  For example, I trade the 15, 30, 60, and 240 minute charts as well so understanding the support and resistance on each chart and market cycle is vital.

We all know the overall direction of the dollar has been down BUT that doesn’t mean that the market cycle on all time frames in in mark down.   The cycle on the 30 minute chart looks nothing like the daily chart.  I did pull the daily out of its 52-week market memory however I maintained the angle for the image.  Here is 30 minute chart is the shallowest market memory or “lookback” allowable:  One week. It’s clear to see that on this time the market is moving higher and therefore the opportunities I will be looking for will be trades that would do best as the dollar strengthens or can maintain buying support.

–>  See updated 30 minute U.S. Dollar Index chart here

A look a the 240 minute chart shows another market cycle and thus reflects an entirely different psychology.  The transition in the market cycle — while still not yet complete — does show the stall in the downtrend as the longer term psychology of the 240 reflects a pause or at least less bearishness as the Wave moves more sideways and buyers support 75.00.  This type of transition is difficult to predict and thus I know that this 240 minute time frame across my forex market may be difficult to gauge as to whether I should play accumulation market entries like momentum trades or exhaustion plays appropriate for the distribution cycle.  The easiest and lowest risk play would be using 75.00 as support and that would mean $EURUSD exhaustion off ceilings or $USDCHF support entries…as long at 75.00 to 74.90 holds.  It’s all conditional!

–> see an example of an intraday $EURUSD exhastion play here

Be sure to consider to the market cycles on each time you trade as it relates back to the pairs you trade!

– Raghee, http://www.twitter.com/ragheehorner

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Tickers: $EURUSD, $USD, $USDCHF

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