More on USD (2011-08-05 DXY analysis)

Last week's Monday (25-July) I wrote that HSI would experience a big drop and reach 21,000 last week. It seems like I had made that conclusion too early and given no time for the index to move as so. And today HSI is going to reach 21,000 following the 4% plunge in US markets and more than 3% slump in European markets and Japan markets currently.

Looking at the weekly chart, we can find a support at around 20,900 (fibonacci). If the index breaks this level, which means it has plunged through the middle line of fork as well, next strong support will be at around 19,500.



Above is the daily chart of US Dollar Index (DXY). I anticipated that the index would drop further because of the bearish flag.

However, Japanese and Swiss both acted against their strengthening currencies, which harmed their export trade. Therefore, we can see that the Japanese Yen and Switzerland Franc both weakened yesterday.

Indeed, most of the major currencies weakened against US Dollar, which may be one of the reasons behind the 4% slump in stock markets.

DXY was back into the large flag, and broke out the bearish flag I mentioned on Tuesday. 76 will be the next resistant level.

MACD and EMA crossed and gave a bullish signal. RSI is at quite a high level, so the index would probably consolidate for one or two days before starting another large rise.

General trend is still bearish, as the index is still under the red down-trend line. If it breaks out (76), then we can conclude that the whole trend has changed. Bullish Dollar Index would basically mean bearish stock markets too.

Good luck.