The U.S. Dollar Index remains the most important chart in the trading universe right now. Simply put when the dollar declines the stock market inflates, and when the dollar rallies the stock market indexes deflate. It is just that cut and dry. The only time the dollar does not have an effect on the markets is when the trading volume on the stock indexes is extremely light and the market seems to be in euphoria over some bullish news or economic report like we saw in February and March 2010. Other then that, the Dollar is the driving force behind every rally and decline. Last week the U.S. Dollar Index pulled back closing lower by 0.98 cents to $87.25 after making a new high for the year on Monday June 7th, 2010. As the chart outlined last week the dollar was getting a bit extended and did come into near term resistance on the weekly chart. Therefore, a pullback is not a huge surprise. From this pattern the dollar could pullback further or even have a correction. However, once a pattern is in place again this currency could move back to new highs. At this point take it one week at a time.
Traders and investors that want to trade the U.S. Dollar index to the long side can use the PowerShares DB US Dollar Index Bullish (NYSE:UUP). For the traders and investors that would like to trade the dollar to the downside or short the currency can use the PowerShares DB US Dollar Index Bearish (NYSE:UDN). Understand your key levels in this market, learn to utilize them properly and profit from this incredible traders market!
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