FX:USDOLLAR Dollar Index
Last week, I wrote that I expected the Dow Jones-FXCM US Dollar Index to break a resistance level at 12,040 points. The failed break at the beginning of the week was followed by a 1% drop yesterday, that cannot be explained by hard fundamentals. I think it had to do more with repositioning by traders who had bought the greenback too late on Friday/Monday (i.e. short squeeze on EUR/USD ). This morning I have noticed that the USDOLLAR seems to be stabilizing just above a line coming in from the June lows. This would be the third test necessary to confirm the presence of such a trend line for all those die-hard tech traders. If the dollar bounces back up to levels seen Monday, my initial call for a breakout above 12,040 points would still be in play. Any longs initiated at current levels have a decent risk/reward ratio as stops are relatively tight (just below 11,060 points should be fine).