ICE US Dollar Index jumps back over 80 but oil prices remain firm

The ICE US Dollar Index has jumped back over 80 in trading today as the euro falls to support near $1.29 and gold futures stay flat, but oil prices, which have started the year with big gains remain firm, mainly over Middle East supply concerns.

Latest Dollar Index Rate

The ICE US Dollar Index, which tracks the US dollar against six major world currncies was trading at 80.650 today, from the session open og 79.912.

Dollar Index Trends

The most important lower support level for the Index is at 74.5. There are three resistance levels. The first resistance level is near 79.5. This is the lower edge of a narrow consolidation band. The second resistance level is near 81.5. The dollar index is currently trading inside this narrow consolidation band. Further weakness in the euro will lift the dollar index above 81.5.

This consolidation band is important because when the US Dollar Index breaks above 81.5, the third resistance level is near 88.5.

Historically there aren`t any strong resistance levels between 81.5 and 88.5. This may develop a very fast parabolic trend similar to the trend in 2010 May. This potential for a very fast rise has significant consequences for other currencies.

A fast up move in the US Dollar Index above 81.5 suggests increased weakness in the euro to US dollar relation, with the potential for the euro to fall below support near $1.24. This may test the historical lows of $1.19 for the euro in June 2010.

Gold Prices and the Dollar

Strength in the US Dollar Index is also bearish for gold. Gold has support near $1550. Lower support is near $1450. Normally these targets would be achieved because of the increase in strength in the US Dollar Index.

However, in the current situation, the weakness of the euro is the main reason for US Dollar Index strength.

Traders may also decide to shift into gold as a hedge against euro weakness and this will counterbalance the extreme bearish pressure in gold. The exact impact on the gold trend is confused because of these two different pressures.

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ICE US Dollar Index jumps back over 80 but oil prices remain firm