With the US Dollar Strengthening, officially reversing the trend back to the upside, and consolidating above support, let’s look at the daily and weekly chart to see what’s happened and what might be in store.

US Dollar Index Daily Chart:

The dollar bottomed at the same time that the US Stock Market bottomed (July 15th), yet the dollar has surged with massive relative strength over the equity indexes, which rallied comfortably and then now are ‘chopping’ around the daily charts.

I cannot underscore how powerful and meaningful this recent momentum impulse was and what it means for the US Dollar Index.  This is one of the strongest upward surges in the index in years (both on the daily and weekly chart) and the assumption is that it is powerfully bullish for the Dollar.  New momentum highs often precede new price highs.

The trend of the Dollar Index is now positively confirmed as “up” (after making a higher low, higher high, and then taking out that high) and then breaking solidly above moving average resistance.

In terms of the moving averages, the 20, 50, and 200 day moving averages are officially in the “most bullish orientation possible” in terms of the 20 being above the 50, with both above the 200.  One cannot ignore this development – these moving averages now serve as expected price support.

Also, I have drawn in small blue Fibonacci retracement levels off the July 15th low to the August $77.50 high.  The retracement support levels are the following:

38.2%:  $75.25
50.0%:  $74.50
61.8%:  $73.75

That being said, let’s look at the structure on the weekly chart.

US Dollar Index Weekly Chart:

A positively confirmed trend reversal (up) has also occurred on the weekly chart, which is a dramatic development many assumed to be impossible.  The blue hash marks represent a higher high, higher low, and the confirmation (break above) that level.  Also, price has broken above the 20 period EMA (which is a significant development) and now above the 50 week EMA (also a critical development).

We can now expect these averages to provide potential (initial) support.  The 20 week EMA rests at $73.30 and the 50 week EMA rests at $75.40.

We could be due for a clean retracement of the recent powerful impulse (price doesn’t go up forever) which is why I’ve called attention to the potential support levels.  But for now, with a fresh trend change officially in place, we have to shift our interpretation and focus to the bullish side unless proven otherwise.

The downtrend has ended and now we’re into a new environment – be sure to pay attention to all the intermarket relationships and economic realities that will come from this new development.