USD Index Notches a New High

Last week, we covered the USD and concluded it was poised for gains. The Dollar did, in fact, gain against most of its major counterparts and the DXY notched a new high, breaking slightly above its December highs. The DXY is a weighted average and its heaviest component is the Euro. Therefore it should come as no surprise that the previous week was rather rough on the common currency. Greece is still very much in the news and not in a good way, dragging the Euro lower.

Last week's post mentioned that the USD was a win/win situation where either strong economic reports or very poor readings could send the dollar higher on expectations for higher interest rates or a flight to safety respectively. Unfortunately, it was a flight to safety that sent the dollar higher. So long as uncertainly and concerns cloud the economic skies, we are likely to see the USD trend higher. This week, however, the dollar will have to push a little harder to be able to maintain its momentum as it approaches new resistance levels. The first resistance level is right where the dollar made its new high on Thursday around 78.80-79.00. The next level the USD will need to overcome in order to march higher is 79.50. A clear break above the 79.50 level could send the dollar as high as 81.00.

An upward move for the USD this week is likely, though not as likely as it was last week. The higher probability is for some sideways consolidation while uncertainties in the economy clear and earning reports shed more light on the state of affairs.