Dollar Index Rally From 6-Month Low May End: Technical Analysis
The Dollar Index’s rally from its lowest level in more than six months may be near an end, Royal Bank of Scotland Group Plc said, citing trading patterns.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, declined from this year’s peak at 84.10 on July 24 to 78.60 on Sept. 14, the weakest since Feb. 29, according to data compiled by Bloomberg. The index recovered to as high as 79.77 on Sept. 24, but failed to advance beyond 79.90, the 23.6 percent Fibonacci retracement level of its July- to-September drop, the data show.
Recent gains “are kind of corrective,” said Greg Gibbs, a Singapore-based senior currency strategist at RBS. “You’ll presume that the Dollar Index is going to struggle to push much above 80. The Sept. 14 low is a key support level,” he said, referring to the price where there may be orders to buy.
The Dollar Index was little changed at 79.51 at 1:04 p.m. in Tokyo from 79.52 yesterday. It has fallen 0.8 percent this year, set for the first annual loss since 2009, according to Bloomberg data. The 80 level was last seen on Sept. 12, when the gauge climbed to as high as 80.02.
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break above resistance, as levels where there may be orders to sell are known, indicates it may advance to the next level.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, currency or index.
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