(Bloomberg) -- A “golden cross” of two moving price averages of the Dollar Index for the first time in 18 months indicates that the rally in the greenback may accelerate, Auerbach Grayson & Co. and Brown Brothers Harriman & Co. say.
The index, used by IntercontinentalExchange Inc. to track the dollar against the currencies of six major U.S. trading partners including the euro and yen, may rise to 84, the highest level since May, in three months as the 50-day moving average crossed above the 200-day mean, said Richard Ross, a global technical strategist at Auerbach in New York.
The gauge rallied 13 percent to the highest level in two and half years the last time it built a “golden cross” in September 2008, he said. “This time is very similar,” said Ross. “It has built a very nice base from healthy consolidation and now it’s time to climb up.”
The Dollar Index has gained 3.6 percent this year to 80.64 at 12:21 p.m. in New York. The measure slumped 4.2 percent last year.
It’s a “good sign” for medium-term investors in addition to the dollar’s long-term bullish trend, said Marc Chandler, global head of currency strategy at Brown Brothers in New York. “This is important for all fund managers as they may want to leave more money at home this year.”
The index could meet resistance at the 82 level, as it nears the 50 percent Fibonacci retracement of its move from the 2009 high of 89.11 to a low of 74.27 in the same year, Ross said. Fibonacci charts are based on the theory that securities tend to rise or fall by specific percentages after reaching a new high or low.
A moving average is a technical indicator that displays the mean value of a security over a certain time period. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.
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