With all the negative sentiment, the greenback has continued to hold its uptrend line. This shows that if everyone is selling, there's nobody left to sell.
As I wrote last week, as long as it stays above 75.62, it's reasonable to expect a rally. There is no outstanding negative sell signal on the weekly chart. The trend, as difficult as it is to believe, is up for the last three years. However, there are strong rallies and equally strong pullbacks. The move down over the past eight weeks has a steep angle of descent which is difficult to maintain so I'd expect a rally because of this alone. In addition, the pair is also at the lower trend line. The next move, just as on the monthly chart with its triangle (not shown) should be up.
I wrote last week that the price targets for the monthly chart were 83.65, 85.00 and 87.73. The weekly chart adds a lower target of 79.02 (the downtrend line from the 2010 high of 88.66). Overcoming the prior high would require rising above 81.44.
RSI looks OK on the weekly chart. Note that it never dropped below 30—oversold—since 2008, despite the bearish sentiment.
If the index drops below 75.62, watch if it moves below 74.16. That would confirm a double top with its uh-oh connotations.
Here's the weekly chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
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