Bloomberg News

Dollar Index May Drop 1.2%, Commerzbank Says: Technical Analysis

October 27, 2011

Oct. 27 (Bloomberg) -- The Dollar Index may extend three weeks of losses should it close below its 200-day moving average, Commerzbank AG said, citing trading patterns.

The gauge, which IntercontinentalExchange Inc. uses to track the U.S. currency against those of six major trading partners, would then be poised to decline a further 1.2 percent, said Karen Jones, head of fixed-income, commodity and currency technical analysis in London.

“The Dollar Index daily chart has reached the 200-day moving average at 75.78,” Jones wrote in an e-mailed report today. The “downtrend at 76.50 dominates. While capped here, we look for losses to extend to 74.88.”

The Index dropped 0.6 percent to 75.77 at 6:18 a.m. in New York, after falling to 75.60, the lowest level since Sept. 8. The last time it traded at 74.88 was Sept. 6.

The level of 74.88 represents the 78.6 percent Fibonacci retracement of the Dollar Index’s advance from August until October, she wrote.

“Only a close above 76.50 would imply the end of downside pressure currently,” Jones wrote.

A moving average is an indicator that displays the average value of a security’s price over a period of time. A close below the level suggests the asset may be on the decline.

Support refers to an area where analysts anticipate orders to buy a currency and its related instruments. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, currency or index.

--Editors: Nicholas Reynolds, Peter Branton

To contact the reporter on this story: Keith Jenkins in London at Kjenkins3@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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