Dollar Under Pressure
By Colin Twiggs
July 23, 2009 1:00 a.m. ET (3:00 p:m AET)
US Dollar Index
The US Dollar Index is testing primary support at 78.50; breakout would signal a primary decline with a target of 73*. Reversal above 0.81 is unlikely, but would test resistance from the March low at 83.
* Target calculation: 78 - ( 83 - 78) = 73
The euro broke out above the recent triangle against the greenback, signaling a primary advance with a target of $1.50*. Follow-through above $1.43 would confirm the signal. Reversal below $1.38 is unlikely, but would warn of reversal to a primary down-trend.
* Target calculation: 1.43 + ( 1.43 - 1.37 ) = 1.49
The dollar respected the new resistance level at ¥94, but this will only be confirmed if short-term support at ¥92 is broken. Failure to test the upper trend channel would warn that the down-trend is accelerating — and likely to test the December low of ¥87* in the medium-term.
* Target calculation: 94 - ( 101 - 94) = 87
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The Aussie dollar continues its narrow consolidation between $0.78 and $0.82 against the greenback. The positive interest rate differential with major reserve currencies is driving demand. RBA selling of Australian dollars — accumulated when supporting the currency in late 2008/early 2009 — however, strengthens resistance. Almost A$2 billion was sold in June alone (WSJ). The CRB Commodities Index is also likely to hinder another advance until its secondary correction has clearly ended. Breakout above $0.82 would signal a primary advance with a target of $0.90*. Reversal below $0.77 is unlikely, but would test support at $0.70.
* Target calculation: 0.80 + ( 0.80 - 0.70 ) = 0.90
When buying and selling are controlled by legislation,
the first things to be bought and sold are legislators.
~ P. J. O'Rourke