Dollar Under Pressure

By Colin Twiggs
July 23, 2009 1:00 a.m. ET (3:00 p:m AET)

These extracts from my trading diary are for educational purposes and should not be interpreted as investment or trading advice. Full terms and conditions can be found at Terms of Use.

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

Euro

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

Japanese Yen

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

Australian Dollar

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

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