The bearish picture for the US dollar index has continued this week once again, with Tuesday’s failed attempt to rally adding further downwards pressure to an already negative picture. Indeed this was strongest signal so far this week, with the daily candle ending with a deep upper wick and closing at the opening price, having failed to hold above either the 9 or 14 day moving averages. In addition we now also have two bear cross signals on the daily chart, with the 9 day moving average crossing below the 14 day moving average and the 40 day moving average breaking below the 100 day MA, as we now begin to approach several key technical levels which will dictate the longer term picture for the US dollar, and market sentiment in general.
The first of these is the low of early February at 76.81, and a breach at this level is likely to be followed by a test of the 75.63 level of early November, followed by the 74.17 low of late 2009. If the last of these levels is breached then expect to see the index plunge lower on on towards the 71.79 low of mid 2008.
The weekly chart reflects this bearish picture with the index currently trading below all five longer term moving averages, and with the 9 week having crossed firmly below both the 14 week and 200 week, sentiment remains firmly bearish, and as such we can expect to see the reflected in all the major currency pairs. The 9 week moving average is particularly strong at present, with rallies both last week and this week having run into this key technical barrier.