The dollar index had a choppy day of trade Friday as fears of further Chinese tightening weighed heavily on the Shanghai Composite and dragged global equities lower. The dollar however, was not as broadly bid as one may have expected in such risk averse times as some investors took the change to book profit on recent euro short positions off recent highs. Despite the choppy trade the index managed to eke out a positive close capping its best week since early August. Over night the dollar has found itself happily bid as the yen weakens after Japan’s third-quarter GDP beat expectations lifting risk appetite. The euro also remains under mild pressure despite the fact that Ireland continues to refuse offers from the EU and IMF for financial aid. Concerns over EMU sovereign debt and fears surrounding potential Chinese tightening are likely to be the dominant themes early this week, both of which should be bullish for the dollar. Turning to technical’s for a moment, the fact that the index failed to close above 78.30 on Friday has us a little concerned that we may stall out around this level if dollar gains don’t get moving again. We remind readers we were looking for a close and break above 78.30 as a signal that a short-term double-bottom is in place and the index can/will accelerate gains, failure to do so would negate, or at least seriously question this outlook and further significant dollar gains. Written by Jonathan Granby, DailyFX Research Team If you wish to receive Joel’s reports in a more timely fashion email jskruger@fxcm.com and you will be added to the distribution list. If you wish to discuss this or any other topic feel free to visit our Forum Page. DailyFX provides forex news on the economic reports and political events that influence the currency market.
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