DOLLAR INDEX

DOLLAR INDEX

The only index to nearly touch its three year high this year is the dollar index. This is natural considering the uncertainty surrounding the EURO and other countries debt problems, but at the same time the dollar index has a significant effect on the equity markets .dollar index has inverse relationship with the equity markets which means a rise in $ index will lead to fall in the equities and vice versa.

The dollar index off late has risen to almost its three year high and now faces a huge resistance in the 89-90 zone and can retreat a little. The index has support at 84-85 zone a fall till this level won’t be of much importance but a fall below this will be a bullish sign for the equities. The index also has –ve divergence developing in the charts which will be watched by the shorts .however if the index manges to climb above 89-90 region it will set off a short covering frenzy and will be bad for equities and also indicate that the debt problems in Europe are far from over.

So important points to keep in watc

1>     Level of 90 above which dollar index will gain more momentum.

2>     Level of 84-85 below which the fall in index will accelerate and provide boost to the equities

3>     The negative divergence on charts which is keeping the index in check .