The US Dollar Index appears to be continuing its journey downwards out of a confirmed break-out of a bear flag.  Let’s see this structure and identify possible downside targets.

Check out the post I wrote on April 24th entitled “Bear Flag Breakdown for the US Dollar Index?” where I showed the initial formation and breakdown of this pattern that has continued to now.

The ultimate “Measured Move” target - should we achieve it - is roughly $81 (logic explained in prior post).

Right now, I wanted to highlight a possible support confluence at the $82.60 level, which comes in at the 61.8% Fibonacci retracement, 200 day simple moving average, and the March 2009 lows.

Price is now hovering at the 50% retracement, and if bears push price beneath $84, then this will set-up a “Magnet Trade” or “Open Air” move to challenge the confluence support mentioned above.  If dollar bulls fail to hold the $82.60 level, then the dominant pattern becomes the bear flag with nothing (chart-wise) left to stop it.

The caveat to dollar bearishness is the $85 confluence resistance area - this area holds the convergence of the 20 and 50 day EMA as well as the 38.2% retracement.

For the meantime, and until proven otherwise, odds seem to favor downside prices for the dollar, which would be bullish for broader commodities.

Corey Rosenbloom, CMT
Afraid to Trade.com

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