The Dollar Index may climb to this year’s high as its moving average indicates upward momentum, Gaitame.com Research Institute Ltd. said.
The index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major trading partners, surged last month by the most since October 2008 and reached a eight-month high on Oct. 4, steepening its 20-day moving average.
“The 20-day moving average points upward, and I use the average as a sonar,” said Takuya Kawabata, a researcher in Tokyo at the unit of Japan’s largest currency-margin company. The gauge has been above the average over the past month, indicating the upward trend is “strong,” he said.
The first resistance for the gauge is 80.702 which is the 50 percent retracement level from a high in June 2010 to a low on May 4, Kawabata said, citing the daily Fibonacci chart. If the index breaks that level and exceeds this year’s high of 81.313, the Dollar Index may rise to 81.444 last reached on Nov. 30, he said.
The Dollar Index was little changed at 78.579 as of 1:50 p.m. in Tokyo.
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break above resistance, or below support, indicates it may move to the next level.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. A resistance level on a chart is where technical analysts expect orders to sell a currency and its related securities. Support is where buy orders may be clustered.
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