The US Dollar Index fell initially during the session on Wednesday, but the 81.30 level offers support yet again. Because of this, we ended up forming a hammer, which was preceded by a Tuesday shooting star. The 81.70 level looks to be resistive, and on a daily close above that level I believe that we go to the longer-term goal of 84. Granted, this isn’t going to be an easy move to make, and it certainly will take a certain amount of time. After all, it is a huge move but I believe we should be able to make that move, especially considering that there is so much trouble in Europe at the moment, and the EUR/USD pair does in fact contribute 40% of the movement in this contract.
That being the case, I think as long as Europe struggles, the US dollar should continue to do quite well. With that being the case, the market should continue higher and it fits and starts should be the order of the day. On top of that, the British pound now looks very soft, so that could only add fuel to the fire as far as I can see.
A safety play, as well as economic reality.
The US dollar can be a safety play in times of uncertainty. However, there is also the component of the US economy doing better than many other ones, so it makes sense that the US dollar of course would appreciate in general. I believe that the market has a massive amount of support at the 81 handle as well, considering that was a fairly significant move higher, and the 81.30 level has been resistive in the past also. With that being the case, I feel that the market should continue to have buyers every time he drops, and ultimately send this market higher based upon traders recognizing that the market is in fact going higher over the longer term, thereby sending more and more players on the long side as it allows profits.