USD on the Limelight

Written by Research | 13 November 2009

On Fundamentals & Technicals :

The Asian-Pacific Summit in Singapore has been a medium of the US Government to promote and continue to encourage Asean countries that the US Dollar is still the pre-dominant factor as the World Reserve currency for international business development. Although, the Chinese Reminbi or better known as the Chinese Yuan is also part of the agenda inline with the concerted market call for currency rate adjustments with the overall economic recovery. These are the two main issues being discussed to improve better economic relationships with the major trading partners from the United States , Europe and Asia.

As we have seen a small recovery on the US Dollar through its measured index ' USDX ' after establishing a previous low of 75.84 basis point back to the 75.70 levels which happens to be the 1st resistance price levels that needs to hurdle. As shown below on the chart of the USDX dated the 12th of November 2009. The overall Major Trend seen for the past few quarters that the US Dollar has been moving in an orderly manner where no dramatic drop of prices were ever sudden on a day to day basis.

USDX DAILY CHART

The technical outlook could be analyzied that a slight recovery on a day to day basis can be attributed to teh oversold conditions and a corrected movement also indicated by the percentage rate change which made some readjustments and is now inline with the previous prices set ;last October 20. However, please be cautious of glitches in prices set as the price and volume related to the November 02 movement may have to be confirmed; although it can be assumed and speculated that such volume increase may have resulted to some market players capitulation when the USDX tried to make an earlier recovery from the good economic figures then.

A slight increase on volumes and open interest on a day today basis may still not be as significant becasue the total open and volumes indicators for the week comparing it from the previous weeks are still to be due by the end of the week. But the four (4 ) bar candlestick formation coming from the low side is an indication of a good reversal. Although, no confirmation can be made until it first hurdles the 75.80-76.10 to the 77.80 high set with increasing volume and open interest.

A reversal could be a price direction reversal stage prior to a market trend reversal until a new high from its previous week has been registered. The mid-price from the Donchian channel at 76.18 may also hold the key to an earlier sign where some speculative long positions would be establish. But it also depends on the risk appetite and cah money flow towards the US dollar between the 3rd and last week of the month of November. Which happens to be a cyclical pattern for any corrective movements of the market prices. As institutional particpants, portfolio manager / hedge funds managers make certain adjustments and liquidation towards the end of the year.

As we have mentioned that the GBP/CHF from our previous Market View 25 and our Forex Articles on hubpages that the Long-term position can be establish at the 1.6730/50 - 1.6800 levels that may be on the way upwards as the GBP/USD may continue to correct as the USD/CHF follows the lead from the USDX for its corrective movements. Remember, that a major correction may not be a true reversal but a major correction do exists within a Major Trend. And in the Forex Market anything can happen. Below is the Chart of the GBP/CHF with a the same parameters and technical tool of the Donchian Channels as an indicator for breakout price directions.

GBP/CHF DAILY CHART