The US Dollar Index initially fell during the session on Wednesday, testing the 80.70 level for support. We did in fact see buyers come back into the market in that general vicinity, and as a result I believe that the US dollar will continue to climb and value overall. After all, the hammer of course is a very positive sign, and you have to keep in mind that this is a nice representative look at the value of the US dollar overall. Do keep in mind that the Euro is without a doubt the largest component of this contract, but we also will have to keep in mind that the British pound in Japanese yen are very influential as well.
Ultimately, I believe that the hammer shows that the market is trying to get above the 81 handle, and as a result we could see continued weakness in certain currency pairs, especially the EUR/USD pair, which has broken down over the last couple of sessions. With that being the case, I feel that watching this contract will be very important, as it could lead to US dollar strength around the Forex markets.
Always a nice indicator, even if you don’t trading it.
The US Dollar Index is in a contract that all of you will trade. However, more and more Forex brokers are allowing people to trade this contract via the MT4 platform. With that, this of course offers a nice opportunity to trade this market, and with a very specific amount of leverage. After all, most of these brokers will allow you to trade various sizes.
However, the US Dollar Index can be expensive if you have to go through the futures market. There are binary options available, as well as longer-term options. Ultimately though, I do like looking at this chart as a general idea of where the value of the US dollar should go overall, and therefore look for the weakest currencies to match up against it if it is going higher, and vice versa if it is going lower. Either way, this is a market that you should be paying attention to.
