The US Dollar Chart Pattern That No One Is Talking About
11/10/2010 12:01 am EST
The dollar index registered its second straight higher daily close yesterday. If it manages to add a third, it will only be the third three-day run of higher closes since mid August, which gives a clear indication of how brutally the dollar has been beaten down lately.
While news itself was light, the underlying trends (selling the dollar) have been pushed aside and focus has shifted back to the euro zone and the associated risks. Hence, we have seen a resurgence of articles about Irish debt, Portuguese weakness, and bubbling Greek concerns, topics that had been sidelined for months and are now coming to weigh on the euro. This shift in focus off the dollar and onto the euro has facilitated recent dollar gains and should continue to boost the buck.
We see technical support for this theory, as the dollar index appears to be forming a double bottom. To confirm this, we need to see the index break back above the October 22 high at 77.75.
Once the index breaks back above this level and has the double bottom in place, gains should start to accelerate back toward the psychologically important 80.00 level.By Jonathan Granby of DailyFX.com