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).
For a quick video update, Adam Hewison just released an “Update Video on the US Dollar Index” which takes a look at the monthly, weekly, and daily structures, adds in a discussion on their “Trade Triangles,” and gives projections - similar to what I’ve shown above - that we could be setting up for a test of lower levels.
Adam writes, “MarketClub’s “Trade Triangles” remain steadfastly bearish and there appears to be no lasting turnaround in the Dollar Index as of this writing.”
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
Follow Corey on Twitter: http://twitter.com/afraidtotrade
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