The dollar index may be approaching support which could see the currency appreciate in the coming weeks. Breakdown at this current level could see the greenback depreciate further to the lowest levels since September. Consequently, a move high could see initial resistance from the 50-day moving average at 79.98, a move of 1.6%, with further resistance as high as 83.2, a 5.65% gain. Overall, the index has moved sharply lower since peaking at nearly 90 in early March as stocks bottomed.
Factors that could incite concern include the possibility that GDP results in the United States follow the weaker than expected release seen last week in the U.K. Also, sales in the months ahead are expected to improve consistent with the rise in consumer confidence. Failure in these indicators could weaken sentiment ahead of third quarter earnings and lead to a retracement in equity markets. The past two weeks has seen a sharp rally of more than ten percent in the Dow Industrial Average to the highest level since mid-November. Meanwhile, the RSI indicator climbed above 70 into overbought territory for the first time since June 2007, signaling that stocks may be limited from considerable gains in the near-term.
[B]Dollar Index Daily Chart
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