Dollar Index Weekly Chart Update for Sept 16

Sep 16, 2009: 10:48 AM CST

Let’s take a look at the US Dollar Index, which has broken Fibonacci support and could be falling off a cliff from this point.

Weekly Chart:

The 61.8% ‘closing’ Fibonacci grid retracement line rests at the $78 level, which provided support since last August as price flatlined at this level.

The $78 zone also provided resistance in December 2007, and according to the “Polarity Principle,” would have been expected to be a support level into the future.

However, the US Dollar Index lost not only the $78 level, but just recently the $77 level which is sort of the demarcation line between “just taking out stops” (bear trap) and “something bigger could be going on.”

This is a startling development which needs further attention and monitoring to see if price continues to make new lows from these intended support levels.

The weekly and daily momentum indicators show positive divergences, but remember that trends take precedence over indicators/oscillators… and the trend is confirmed as down using the monthly and weekly charts (price has made lower swing lows and lower swing highs; is beneath the key EMAs, and the 20 and 50 EMAs are in the most bearish orientation possible).

Barring any reversal off the lower Bollinger Band, it looks like the index could fall to test the lows of 2008 – I really expected at least some sort of rally to come off these levels either of short-term or intermediate term degree.

Let’s keep watching this market very closely for any sign of positive action… barring that, there’s a clear pathway to the lows (which would be bullish across the board for commodities as well as the US Stock Market).

Corey Rosenbloom, CMT
Afraid to Trade.com

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9 Comments

9 Responses to “Dollar Index Weekly Chart Update for Sept 16”

  1. Garuda Says:

    What's the 61.8% retracement level if you measure from the upper shadow to the lower shadow instead of body to body?

  2. Corey Rosenbloom, CMT Says:

    Please note that I said “Closing” (price) Fibonacci grid.

    This is an advanced method as taught by Constance Brown in her “Fibonacci Analysis” book.

    I strongly suggest all traders who use Fibonacci grids read this work.

  3. the99th Says:

    Agreed that a break lower would be powerful, but I disagree with your points. I think we´re looking at a throw-under of an ending diagonal, the risk/reward ratio is particularly sharp right now and I don´t have to wait much to be proven right or wrong.

  4. Don-Da-Mon Says:

    Corey, what does EWT show for the dollar index? I'm hearing 76 is the bottom before an up move, however, like you have said, I don't see any support until 71/72.

  5. Corey Rosenbloom, CMT Says:

    Hey Don,

    They're actually quite bullish (and bearish stocks and gold) and -without giving specifics- you're right about what they think about $76.

    It could be a fake-out before a reversal up but where do you draw the line between “Oh, it's just a bear trap” and “This is an official sell signal”? We each have to make that decision.

  6. Don-Da-Mon Says:

    Corey, thanks for responding. Why do you use “they think”? I thought your use of EWT has shown good results. Why not, in this case? Feel free to give EWT specifics.

  7. Don-Da-Mon Says:

    Corey, what does EWT show for the dollar index? I'm hearing 76 is the bottom before an up move, however, like you have said, I don't see any support until 71/72.

  8. Corey Rosenbloom, CMT Says:

    Hey Don,

    They're actually quite bullish (and bearish stocks and gold) and -without giving specifics- you're right about what they think about $76.

    It could be a fake-out before a reversal up but where do you draw the line between “Oh, it's just a bear trap” and “This is an official sell signal”? We each have to make that decision.

  9. Don-Da-Mon Says:

    Corey, thanks for responding. Why do you use “they think”? I thought your use of EWT has shown good results. Why not, in this case? Feel free to give EWT specifics.