Dollar index approaching a key resistance level

The dollar index is approaching a key resistance level as we lead up to the weekend at 80.60, the 50-day sma. If we can get above here it would suggest that the recent dollar strength could be more than just a short term correction.

The dollar index measures the dollar’s performance vs. the US’s largest trading partners and gives a good overall read on greenback strength. Right now the dollar is in the ascendency and is rising strongly versus the euro and the pound, but dollar strength has been muted versus the AUD, CAD and JPY. However, if we can get above 80.60 it then dollar strength may become broad-based into next week.

From a technical perspective, a break above 80.60 would suggest that the trend is changing for the USD and the bulls are taking control. Some levels to watch include:

Resistance: above 80.60 opens the way to 81.05 – the base of the daily Ichimoku cloud. Above here is a key bullish development as it would mark the end of the technical downtrend. 81.40 – the high from 16th Sept (prior to the FOMC shocker) is also worth watching.

Support: On the downside, 80.25 – the low from today – could cushion any short term downside. Below here 79.80 – the low from Thursday - is key support level that also coincides with the Kijun line on the daily cloud chart.

Source: Forex.com

01.11.2013