04/09 - Defies bearish seasonal forces

The US Dollar Index has rebounded after failing to sustain losses below the 84.30 pivot and highlights on-going support via the 160-day MA. This has enabled a push above the mid-level threshold of MACD and a downward sloping RSI trend line. This zig-zag formation has found support from the former resistant 20-day MA, but will have to clear the bull-bear 50% retracement zone at the 86 handle to further defy bearish seasonal forces. A sustained loss of the 100-day MA should re-open key 160-day MA support then the 200-day MA.

{STRATEGY} LOOK TO SELL (BUY EUR/USD)

04/02: April seasonal patterns

The month of April has historically been unkind to the US Dollar Index. Over the past seven years, the Greenback has seen gains in April only twice, both times were supported by either Fed tightening, hawkish rate expectations or both. Both seasonal charts shows that on average, the dollar tends to fall throughout the month then bottom out in early May. April also tends to be one of the strongest seasonal months for the DJIA and S&P, both of which have had strong inverse correlations with the US Dollar Index. These seasonal factors alone suggest that a sustained loss of 84.30 (former consolidative resistance) will enable the dollar to test the key 200-day MA.

STRATEGY: SELL USD's

3/31: Yen retreats on Japan's last day of fiscal year

03/27 - Probing a key fib & the 100-day MA

The US Dollar Index has pared recent losses and is now probing a key fibonacci retracement (38.2%) and the 100-day MA. Overbought daily RSI & MACD along with hourly bearish divergence have induced profit-taking in energy (crude oil) & equity markets which have had strong inverse correlations with the Greenback. Dollar bears that had jumped on Geithner's misconstrued comments earlier in the week were further squeezed as the euro suffered it's largest one day drop in more than two months. Bearish comments by a German Fin Min and expectations that the ECB may accept QE policy after all, helped the dollar surge through the 10-day MA and a descending trend line. While FX markets should continue to follow developments in the global equity markets, if the US Index clears the 38.2% retracement/100-day MA, then the 20-day MA and 35-day EMA should provide decent resistance. If this counter-trend rally in the US Index begins to distribute, a sustained loss of 84.30 (former resistance) will expose the 200-day MA.

03/19 - DXY collapses on the back of Fed's QE policy

The US Dollar Index has collapsed as a result of yesterday's decision by the Federal Reserve to purchase long-term US Treasuries. Although this significantly nullifies the threat of deflation, the Fed's decision greatly enhances their debt load and will significantly increase the budget deficit. The Greenback's weakness is now approaching a cluster of fibonacci retracements in the 82.25-40 region (the 38.2% retracement of the all-time low to the March high & the 61.8% retracement of the December 2008 low to the March high). Further beneath lies the key psychological 200-day MA. Expect weakness to persist while below the falling 10-day MA & a descending trendline in the mid 85 region.

03/11 - Probing below key 20-day MA

The US Dollar Index has lost some ground over the past few sessions on the back of the rebound in equity markets. Indexes such as the Dow Jones Industrial Average and the S&P 500 have each eclipsed their 9-day MA's after reversing out of falling wedge patterns, guided by bullish MACD & RSI divergence. The corresponding bearish divergence has triggered Dollar weakness below the November high pivot at 88.46 to close below the 20-day MA. This has enabled the EUR/USD to eclipse the 20-day MA convincingly for the first time in 2009 and signals a reversal for the Greenback that initially targets the 50-day MA near the 86 handle. It will take a sustained rebound back above 88.46 to alter the bearish structure.

[STRATEGY] LOOK TO SELL (BUY EUR/USD)

03/05 - November's high reverts to first support

The Dollar Index continues to maintain it's uptrend within a rising wedge. Although, daily RSI & MACD demonstrate negative divergence, normally indicative of a reversal, the Greenback remains buoyed by risk aversion and equity market weakness. The next upside target is 89.87, the 38.2% retracement of the entire bear market campaign. Meanwhile, the November high of 88.46 has reverted to support and is now the critical pivot to watch. It will take a convincing break below this key level (roughly 1.2660 EUR/USD) in conjunction with a stock market reversal to divert the market's attention back towards wedge support near 87.00.