(Bloomberg) -- The Dollar Index, which tracks the currency against those of six major trading partners, may slump a further 5.7 percent based on technical analysis, according to Forecast Pte in Singapore. The Index traded on ICE Futures in New York broke the 200- day moving average on May 8 and closed below it. The index also dropped through a major trend-line that ran from July 15 to Dec. 18 on the same day.
“This is a very strong bearish signal,” said Pak Lai Ng, a technical analyst at Forecast. “It is a corrective move from the major uptrend that began since March 2008.”
The gauge touched a peak of 89.624 on March 4 this year, its strongest level since April 2006. The index, which tracks the currency versus the yen, euro, British pound, Swiss franc, Canadian dollar, and Swedish Krona, has since plunged 8 percent to 82.453 as of 10:05 a.m. in Singapore as signs that the global financial crisis is abating encouraged investors to leave the safety of the dollar in search of riskier assets and currencies. “The Dollar Index’s next target could be 80, while a break of that would see the next target at 77.69, the level we reached in December,” Ng said.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Moving averages are used to identify trends and find support or resistance. Support is a level where buy orders may be clustered and resistance is where there may be sell orders.
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