Dollar Index Faces `Upside Hurdle,' JPMorgan Says: Technical Analysis

The Dollar Index faces an “important upside hurdle” at 83.34 and 83.56 following its reversal from a 81.90 support level, according technical analysis by JPMorgan Chase & Co.

The dollar withstood challenges at key support levels, suggesting an increasing risk that the currency could begin to strengthen and push the index, a benchmark for the greenback’s performance against the currencies of six trading partners, higher from its August lows, wrote Niall O’Connor, a currency strategist with JPMorgan in New York, in a note to clients today.

“Those levels will suggest whether the dollar is extending the rally from August or whether we’re seeing a retest of the August lows,” O’Connor said in a telephone interview.

The index fell 0.4 percent to 82.487 at 10:53 a.m. in New York. It has gained 3 percent since touching 80.085 on Aug. 6, the lowest since March.

The U.S. dollar yesterday pierced the 1.0470 level on the Canadian dollar, and with the greenback at a 15-year low against the yen it may be difficult for the currency to continue its decline, O’Connor wrote. The U.S. currency faces downside pressure from the Australian dollar, which is poised to test resistance at the 0.9200 to 0.9225 level, and is approaching medium-term lows against the Brazilian real of 1.70.

In technical analysis, investors and analysts study trading patterns to forecast changes in a security, commodity, currency or index. Support and resistance refer to lower and upper boundaries, respectively, of a trading range where buy or sell orders may be clustered.

To contact the reporters on this story: Daniel Kruger in New York at dkruger1@bloomberg.net.

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