Market Watch: US Dollar Index ($USD)

A lot has been made of chart of the US dollar index lately.  You can see the index in the daily timeframe above. Notice the wedge from March 16 to about May 18 ranging between 87 and 83. Significantly the index fell out of the wedge and dropped like a stone to 80 where it is finding support. Now look at May 25 and May 26, you can see two things happening at once.  The first is that the selling stopped and the buying started as indicated by the red candlestick followed by a white one.  Simultaneously the index itself reversed its downward course and  turned up making a sharp U. This is at the very least an extremely bullish near-term event, or more likely a catastrophe averted were delayed. Averted or delayed which is at? No way to tell right now.

This index is still sick however.  You can see the 50 day moving average is sloping downward and the 200 day moving average is actually flattening out and rolling over to the downside. they can read this anyway they want but I would not jump aboard until the US Dollar Index at lease breaks back above its 200 day in 50 day moving averages.

I don't become really afraid however until I looked at the index in the weekly chart. There you can see strong support at the 80 level,with the technical indicators drifting lower in the huge mass of double top just under 89. this index was well above a hundred just a few years ago but if it breaks 80, ... well as you can see there's just nothing but a lot air beneath it. When the US dollar starts falling like a lead brick, as history suggests, it will take a lot more than air to catch it.