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Currency Market: US Dollar Index Breaks Right Through 200-Day Moving Average

Cody Tafel

The US Dollar Index broke right through the 200-day moving average last week around the 81 level, and the recent weakness in the euro has help propel the DX right to the 82 level. It looks like the head-and-shoulders topping pattern is failing as the right shoulder is being offset to the upside. This confirms my thoughts from last week that this market has moved back into a bullish position, and pullbacks in the US Dollar Index to the 81 level should now be used to add long exposure. If the longer term trend is in fact shifting higher, then the US Dollar Index should not trade back below 80 near term. See the move below.

Click to enlarge

This strength in the US dollar is certainly a change for the markets after these first six weeks or so of 2013, and this does not bode well for risk near term. It is interesting to see this USD breakout accompanied by the S&P 500 (^INX) breaking below the key 1500 support level. Be careful out there!

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