| Dollar index hits congestion |
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| Written by Our Staff Writer |
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February 10, 2010: The dollar index has hit congestion after a rally that began in December 2009, which was predicted by Capturetrends. Now the dollar has to clear the congestion area to move higher. In our report dated November 14, 2009, Capturetrends had alerted readers about the break of downtrend in the dollar and the ensuing rally. To read the report click here: Caution warranted for spot dollar bears.Now the dollar has hit a major congestion area as shown by the red box on the charts below. The currency has to clear the congestion area to move higher. The index spent nearly a month in 2009 in the congestion area before falling making it highly possible for the dollar to be range bound for sometime. However, the uptrend on the dollar is still intact. Notice that both the 50 and 200 exponential moving averages are pointing higher. The averages are also about to make the golden cross, which is extremely bullish. A golden cross happens when the 50 and 200 moving averages cross over. However, remember that the cross over must happen before taking a position. A golden cross may push the dollar out of the congestion area pretty quickly, after which it has a few resistance areas above. We would look for support and resistance areas to enter and exit the major dollar pairs. Readers must however take a step back and take a look at the longer term picture of the dollar. Notice that we have head and shoulder's pattern on the chart, which is a bearish sign. So while the dollar may rise in the medium term, the long term picture looks bearish. Unless the index moves above the right shoulder, the head and shoulders formation is in play. Traditional technical analysis states that if prices break the neckline of the head and shoulders pattern it will make the measured move. The measured move is the distance from the head to the neckline, which is then applied to the point where prices break below the neckline. As shown in the chart the measured move on the dollar index is 11.53. Aggressive traders wait to take profits once 100% of the measured move is completed, conservative traders take profits at 75% of the measured move. A 100 percent measured move will take the index to 67.06. Dollar chart Dollar support and resistance report and chart (for members only)
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