Above is the daily chart of US Dollar Index (.DXY). Thanks to ease of debt concerns in Europe, and worries about debts in US, the Euros have been strengthening, leading to fall in USD Index.
We can see that the index was moving in a narrowing range last two months, before breaking down last week.
The break down was confirmed as DXY remained below the flag for three trading days. It will undergo another bearish trend again.
Next support is undoubtedly the previous low at around 72.8. This is definitely a strong one as many investors might try to buy at bottom.
However, using technical analysis tells us that the bottom should be somewhere lower. The flag started at this level, and break down means that the index will plunge to levels under the flag. So I will be even more pessimistic on the dollar.
Purple line is the resistance, a very short-term and not-too-strong one. DXY has reached it and should probably start to fall.
Ironically, slumps in Dollar usually mean surges in stock markets, which are exactly the opposite of what I expected (or what I wrote yesterday)... we got to see the economic data this week...
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