Forex Traders Push US Dollar to Key Support-Is the Correction Over?

12/16/2008 9:46 am EST

Focus: FOREX

The US dollar has been punished by heavy selling pressure in recent days. The US Dollar Index, an average of the greenback's value against six top currencies, has now retraced 50% of the most recent leg of the rally starting in late September (see chart below). Support is being reinforced by a key upward-sloping trend line, which has guided USD higher since the multi-year downtrend changed gears at historic lows in mid-July. This will be a formidable hurdle for US dollar bears to overcome, with any signs of exhaustion in downward momentum in the coming days opening the door for USD bulls to add to existing positions or initiate new ones.

US Dollar Index - Daily Chart

Chart

By Ilya Spivak, Currency Analyst, DailyFX.com

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