USDx Price Behavior & Analysis

The US Dollar Index as a major indicator for the Forex market more often have been neglected as the primary leading indicator. There has been a few adaptation of the index in some variety as compared with the S&P and the Dow Jones Industrial Average. However, the close correlation and distribution of the other Foreign currency composing the USDx has been the standard of measure in pricing the rest of the major pairs.
USDX Weekly Chart

In this weekly USDX chart, the most recent price action has been in a trading range between the 78.08/10 support price and the 81.55 level of resistance as indicated with the broken line. The rising channel and trend line support has been in the defensive every time it falls on a daily corrective move. A clear example is the USDx retracing lower from an opening gap and ending the American Trading session lower and currently at the 79.55 basis point. For some analyst this daily movement could mean a weakness on the market's sudden reaction from the European elections that died down. However, the prices are seen or interpreted at an even par & just above the previous week's closing at 79.50 where bullishe sentiments are still intact. And inspite of the bearsih candle bar for the day on May 07, 2012 the reaction may well be for the USDx to gain enough momentum for the next leg higher.

The fundamental news from the French election was the main catalyst of the USDx rally with an opening gap at the 79.97 basis point. And is currently retracing its daily low for some technical re-alignment with the rest of the European majors at the 79.73 level. However, even without the news that sustained the rally; the technical candle configuration have shown a weekly buying divergence as prices moved sideways into a consolidation. While the relative strength and the Stochastics showed that the third consecutive swing low had enough momentum for technical traders and strategists to take a well defined trade position with barely a minimal risk factor. Futures traders cross trading the Spot forex with the Futures DXY would have made an awesome trade just from this technical indicator. For now any price above the 80.05/10 closing price would be a bullish signal for the USDX.