Thursday, June 23, 2011

Friday Dollar Analysis

Last week, I observed the dollar appeared to be forming a bottom. Quoting an article from Forex Blog, I noted the dollar was acting somewhat contrary to what we would anticipate: stronger economic data had led traders to a "risk on" strategy, which meant selling dollars while softer economic news led to a "risk off" strategy, meaning dollar purchases. In addition, as the euro has weakened over the last few weeks, the dollar has been the beneficiary.

Let's go to the charts.

On the longer chart, notice that prices have moved through resistance, only to drop back. However, prices again are bumping up against key resistance.

Prices are also forming a consolidating triangle.

The A/D line shows a big move into the market in early May, but not much since. The CMF confirms the lack of movement into the market. The MACD shows increasing momentum, but note the current peak is lower than the last, indicating overall declining momentum right now. While the 10 and 20 day EMAs are still below the 50 day EMA, the shorter EMAs are now moving sideways rather than lower. They are also intertwined. The downward angle of descent on the 50 day EMA is also lower.

The chart is showing many signs of a reversal in progress.