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Even as the Dow Jones FXCM Dollar Index (ticker: USDollar) consolidates in the early week around the 9450 level we effort that now that this support has been taken out and closed below further losses toward the next downside target below 9350 are in the offing. We have talked for some time about the range bound nature of trade in the dollar index and a move back toward the lows by 9350 certainly stretch this range bound theory to its limits but by no means will lead us to a re-think just yet. Naturally, a significant break higher in the next few sessions will negate this outlook and we will once again look upward toward the 9750 region to see if the index can finally break out of its recent range.
While technical analysis is all well and good at such a time we believe that even the biggest techies should keep a keen eye on the fundamental developments which have been directing trade on a day to day basis. Therefore, we recommend closely watching the US debt limit talks and how the market is interpreting the moves as well as any further ratings agency talk about EMU periphery debt.
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