Dollar Index Targets Achieved Today

Sep 22, 2008: 10:18 PM CST

Early this morning, I highlighted the possibility that the US Dollar Index would test the $76.00 level soon which would set up a test of support – surprisingly, that target assumption was achieved in one day – and here we are at the critical test.

Dollar Daily Chart (with Fibonacci):

I mentioned that the next play was to the $76.00 support (with gold and oil likely to rally in response) and that is exactly what happened… far sooner than I anticipated.  I, along with almost all others, was quite shocked at the rapid price movement up in oil today as well as the sharp decline in the US Dollar Index, though the Dollar decline really should not have come that much as a surprise, given the potential inflationary effects the Treasury’s economic bail-out plan will have on the Dollar.

Price stopped exactly at the 50.0% Fibonacci retracement from the July lows to the September highs, and the bulls now have a chance to defend these levels.  The $76.00 level is also significant on the weekly chart as I mentioned earlier today.

US Dollar Index Weekly at Support:

If price continues its trek down beneath $75.50 per share, the bullish bet would be threatened and that would be quite a bearish development – the bearish side probability would greatly increase with a close beneath the $75.00 index level – watch this closely.

The 20 and 50 week EMAs are converging at these levels, and are expected to provide support.  If they fail to, then watch the $75.00 very, very closely, as a close beneath this (especially $74.50) would violate all potential support (from all major moving averages and Fibonacci retracements) and would set-up a retest of the $71.00 index level.

These are critical levels on the index, and the ramifications following the index levels the next few days will dictate the expectations going forward for the index.

Continue to watch the US Dollar very closely.

2 Comments

2 Responses to “Dollar Index Targets Achieved Today”

  1. Chad DePue Says:

    Really enjoy your blog. In this case, wouldn’t the macro environment make technical analysis of little value at this point?

  2. Yang Liu Says:

    Chad, What do you mean bu macro environment? Do you think the 700B bill will send dollar down?