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Dollar Index Review

May 09, 2011 12:55 PM ET
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The LFB's Blog
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No signals as yet on currency trade

The news wires are busy in regard to ‘strong-dollar’ US Administration jawboning, and their inability to back the talk with action. TheLFB client notes have called for consolidation at support above 72.50 on the dollar index, and to monitor resistance at 76.50 very closely. Short dollar index (DXY) signals have completed their course and should be closed. Six days of sideways consolidation allowed only one break-out signal to form.

No signals are forming in the near-term, after last week’s burst of dollar buying energy is absorbed. Clients will be notified when price action breaks and holds.

Sentiment towards the Usd remains mixed. Price momentum favors the long side of trade, but caution is required in expecting a sustainable break-out higher in DXY values above 76.50.
Price Action:
There was strong buying activity previously at 74.50, which is a potential price reversal area of note. This swing point area, where a near-term trend forms and price action reverses previous trade direction, will be closely monitored and signals and alerts sent to subscribers as things unfold.

The daily trading range on DXY is 60 ticks, which is above the historical norm. The 50-day Simple Moving Average on S&P 500 is @ 75.65. DXY price action has a 36-month 75% correlation to crude oil and SPY moves, and a 80% correlation to Eur/Usd.

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