The U.S. Dollar Index has rallied recently in the face of increasingly destitute economic data coming from the United States. Fortunately for the dollar, the rest of the world is in even worse straits.
Andrew Wilkinson, chief economic strategist at Miller Tabak & Co., says the U.S. Dollar Index has benefited from continuing uncertainty in Europe and the dollar’s status as a safe haven. “The biggest factor is the debt environment in Europe, which kind of speaks for itself. There’s all manner of turmoil happening behind the scenes, which is scaring investors,” he says. “The economic numbers coming out of the Eurozone have been tepid at best, resulting in fears that the economy may be slowing further, something that is a global theme at this point.” Wilkinson says traders should continue to watch developments in Europe and economic releases in the United States, especially employment figures. He puts support for the December contract at 76.00 and resistance at 78.00
Joseph Trevisani, chief market analyst at FX Solutions, agrees and expects things to get worse for the euro. “The U.S. Dollar Index is going to be stronger because its biggest component is the euro. I don’t have a very positive outlook for the euro through the rest of the year. Nothing that the Europeans have done, has done anything but move the problem further into the future,” he says. Trevisani expects the dollar to further strengthen if we continue to see weak economic reports from around the world. He puts initial support at 77.00 with strong support at 76.00 and initial resistance at 77.50 but strong resistance at 78.25.