Daily Chart Support Shelf Test in the US Dollar Index

Jun 27, 2010: 11:46 AM CST

Friday’s close in the US Dollar Index took us back to the key short-term support line at the $85 index level.

Let’s take a look at the daily chart to see why this level is important – and where we might go depending if support holds or breaks.

The Dollar Index rallied persistently to the 2009 prior price high at the $89 level – a key price target that has now been achieved.

The index reached this target in early June as a clear negative momentum divergence undercut the new high in price.  We are now seeing an expected pullback to the rising EMAs for support.

Price broke the rising 20 day EMA recently and now tests a convergence of three support levels:

1.  The 50 day EMA at $85.08
2.  The Lower Bollinger Band at $84.76
3.  The “Round Number” price of $85, which also was a swing high in May

If the dollar holds support at this level, then we would see a continuation of the uptrend.

However, if the index fails to hold $85, we would be looking for a sell-swing back to the $82 or $83 level as the next likely swing in price.

Keep in mind that – currently – the 20 week EMA rests at$83.40, as seen below.

So the IF/THEN statement becomes:

“IF above $85, then assume uptrend continues as seen on the daily chart.”
“IF under $85, expect to see $83.50 in a deeper pullback as seen on the weekly chart.”

I explain this in deeper detail, along with the standard analysis and levels to watch in Bonds, Gold, Oil, and Stocks in this week’s Inter-market Report for members.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

1 Comment

One Response to “Daily Chart Support Shelf Test in the US Dollar Index”

  1. Theyenguy Says:

    Yes very good analysis >> So the IF/THEN statement becomes:

    “IF above $85, then assume uptrend continues as seen on the daily chart.”
    “IF under $85, expect to see $83.50 in a deeper pullback as seen on the weekly chart.”

    The US Dollar has fallen parabolically lower. The Dollar likes parabolic and eplosive moves up and down; it is therefore likely; to 83.50; but could move up to 86 or so, before going heavily down.

    Perhaps one might enjoy my chart article The European Sovereign Debt Crisis Started The Age Of Competitive Currency Devaluation, where I relate that the US Dollar has topped out as demand for US Treasury Debt, TLT, and IEF, will likely be topping out, on concerns of the extremely high US Federal deficit; and as such, investment demand for gold, GLD, and silver, SLV, will remain high.

    All currencies, except gold, and possibly silver, will tumble progressively lower into the pit of fiat abandon, until each is totally mutually destroyed.