A Dim View of the USD Index

Focus: CURRENCIES

The USD Index measures the performance of the US Dollar against a basket of currencies such as the EUR, JPY, GBP, CAD, CHF, and SEK. Greg Harmon of Dragonfly Capital offers a long-term technical view of this important index.

Currencies have played a major role in the economies and markets this past year. The euro weakening and the Swiss franc strengthening. But throughout the perception of the US dollar has been mixed. Up one week, down the next. Very tough to pin down whether it will strengthen due to concerns abroad or weaken due to our own fiscal issues. So what do the charts say? Starting with the daily picture, the Index has been finding support at the extension of the long-term rising support trend line and tangled in the Simple Moving Averages (SMA). Most recently it is making a series of higher lows and higher highs suggesting an uptrend continuing.

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The improving Moving Average Convergence Divergence indicator (MACD) agrees with this. Despite being negative, it is improving. But the Relative Strength Index (RSI) suggests that the next move will be lower with a bearish reading and pointing lower.