Wednesday, August 4, 2010

"U.S. Dollar Index Sitting on 200-day Moving Average" A Big Deal? (DXY) EUR/USD

Or not.
All a moving average says is that the "mean" price paid over "X" timeframe is "Y" i.e. roughly half the stock (or whatev) purchased (or sold) over the time period in question is at a profit (or loss).
What is more interesting is fact that other people think moving averages are interesting and sometimes act or refrain from acting as m.a.'s approach certain levels.

This can lead to herding behavior which in turn can lead to self fulfilling prophecies:
"If the price goes below the 200 day m.a. it is a sell signal", which can lead to selling, et voilà, it was predictive!
Here's MarketBeat:
It looks like investors are going to have to make a decision about the dollar.
The U.S. dollar index, which measures the U.S. currency against a basket of six others — thought it is heavily weighted toward the euro — is currently sitting on its 200-day moving average. (The 200-day moving average is a key level watched as a potential indicator of future strength or weakness for the markets. So simply put, moving above it would is seen as a sign of gathering momentum and falling below it would suggest further weakness.)

Since the end of May the DXY — traderese for the U.S. dollar index — is down some 6.7%, with worries about sluggish growth hitting the currency....MORE
Getting the currency moves right can make the rest of the global macro puzzle a lot easier to figure out.*
We've been on the right side of  the Euro/Dollar since November '09; riding the buck off it's lows and catching the peak vs. the € the day it occurred.
Sometimes you get lucky.
If you want to double-check, it's all here, in real-time. Use the 'Search Blog' box, keyword EUR/USD.

*Earlier today:
"Why are Commodities Rallying?"