US Dollar Index Forecast August 18, 2015, Technical Analysis
The US Dollar Index gapped higher at the open on Monday, but turned back around to fill that gap and then shot higher. With this, it looks like the markets ready to continue to go higher from here. After all, the US dollar has been without a doubt one of the more bullish performers that we follow, and we are also towards the bottom of a significant consolidation area that has been in play for over a month now. With this, we believe that the market is then going to head towards the 98 handle where it has faced significant resistance.
On a break above the 98 handle, we feel that the market will then reach towards the 100 level over the course of the next several weeks. In fact, that’s exactly what we anticipate seeing, but we also recognize that at this point in time there are normally a lack of large orders in the market simply because so many large money managers are away on vacation, and this tends to be the quietest part of the year with perhaps the exception of the Christmas holiday.
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With this, we believe the pullbacks will find plenty of support near the 96 handle, and that we should continue to bang around between 96 and 98. Ultimately though, given enough time there will be buyers to push higher than current levels. We also recognize that this is probably one of the most important charts that you can follow currently, because it offers insight as to how commodity markets could go as well.
Having said all of that, we do expect a lot of choppiness and volatility within the current range, so if you do not have the ability to hang onto volatility, you could use this chart as a simple indicator as to how the US dollar should do against commodity currencies around the world. Yes, the Euro is roughly 40% of the Index, but at the end of the day right now it seems like the commodity markets are the most influenced. As this goes higher, currency pairs such as the NZD/USD, the AUD/USD, and others will fall.