Thursday, June 16, 2011

Friday Dollar Analysis

Last week, I wrote the following about the dollar:
While prices have rebounded into the EMAs, the increased volume since the latest bottom indicates the chart may be in the middle of a selling climax. That is giving me pause for now, as we may be seeing a change in overall momentum. Although prices have rebounded into the EMA, I would wait until prices move below previously established lows before shorting. At minimum, prices could be starting to form a sideways consolidation pattern -- probably a triangle consolidation pattern.
My concern regarding the chart's volume was well found. Consider this chart:

The high volume appears to be signaling a selling climax. Prices have rebounded through all the EMAs, and all three EMAs are now moving higher. The 10 day EMA is about to cross above the 20 day EMA.

On the technicals, note teh A/D line spiked higher and the CMF is now slightly positive. Also note the MACD has given a buy signal.

The fundamental reason for the dollar's rise is best explained by Forex Blog:

Ironically, demand for the US dollar is inversely proportional to the strength of US fundamentals. As the US economy has rebounded, investors have become more comfortable about risk, and have responded by unloading safe haven positions in the dollar. With the US recovery faltering, investors are slowly moving back into the dollar, re-establishing safe haven positions. While the dollar faces some competition in this regard from the Franc and the Yen, it still compares favorably with the euro and pound.