Thanks Ted Aivars
The U.S. Dollar Index (DXY) Quickly Approaches Key Resistance
Financial unease triggered by soaring yields for Greek, Portuguese and
Spanish debt along with worries over possible sovereign debt
“contagion” send the Euro sharply lower last week triggering a race to
buy gold and the U.S. dollar. Civil unrest in Greece combined with a
growing perception that the ECU is being run “by committee” added to
an accelerated shift toward the greenback.
While the recent panic has not yet been quelled, measures announced on
Friday suggesting that Euro land’s leaders plan to create a financial
facility to defend the euro and create a pool of capital aimed at
bringing down interest rates in its weaker sovereign economies may
help to reduce fears heading into this week’s trading sessions.
Technically, the U.S. Dollar Index (DXY) has soared and now appears to
be aimed at a test of key trend line resistance at 86.50 while in an
overbought condition on weekly charts. Due to the DXY’s recent inverse
relationship to U.S. equity markets, it appears that while the dollar
likely has a bit more upside ahead of it (before hitting resistance at
86.50), U.S. equity markets may experience further weakness near-term.
If resistance at 86.50 halts the upward path of the dollar index
however, equity prices might once again find their footing and resume
their move toward higher levels.
By Jim Donnelly, Olson Global Markets