Hello there forex friends! today’s I present to you an update on US dollar index which I last posted back in June 24 (kindly see my previous entry here). As you can see, the index has retraced back to the 50% Fibonacci retracement level that I drew after reaching a high of 88.708 last June 7. Given its oversold conditions, the pair would probably head north soon. If the 50% Fib breaks, its long term uptrend line would be its immediate support. Now, if this uptrend gets broken, the index could slide down to around 82.00 or even further at 81.00. But as long as the uptrend remains intact, the index and the USD’s valuation against the other currencies would likely rise.
Remember that 57.6% of the index’s weight is composed of the euro. So if the Euro Stoxx 50 index breaks down as what I presented in my earlier post today (kindly see here), resulting to a slide in the demand for the euro as well, the USDX as a result would rise. Moreover, further declines in the US’s major indices (Nasdaq, DJIA, and S&P 500), would cause some risk aversion, leading the investors back to the safety of US bonds and therefore the USD.