Action - Insight Mid-Day Report 5-22-09

Dollar Index Breaches 80, Time for Stabilization?

Funds continue to flow out of dollar assets as investors are concerned with the possibility of downgrade in US's AAA rating.

Most major currencies climb against the greenback together with crude oil and gold.

The dollar index dives further to as low as 79.86 today, meeting our target of 100% projection of 89.62 to 82.63 from 86.87 at 79.88. However, just like the case in Sterling, we'd believe the downgrade concern is temporary and will fade sooner or later. Indeed, with the dollar index now sitting at important support zone between 77.69 and 80 psychological level, we'll start to look for stabilization in dollar's fall and sign of reversal in greenback's weakness.