As can be seen in the weekly chart above, the USD index has been forming a falling wedge which broke to the downside over the last 3 weeks. Interim support has been found,pushing back into the wedge and now needs to be maintained in order to leave a bullish false break lower. Failure to hold here will likely lead to a break towards last years low at 70.698. However, if maintained and a break of the wedge resistance is achieved, this will confirm the false break lower and will be a signal of USD strength ahead.
So, we are at a pivotal point in the market. Will the USD strengthen and likely take equity markets down with it, or are we about to see an extension of recent weakness in the USD associated with further strength in already overvalued equities? I know which camp I am in. Is a larger multi-month/year reversal pattern forming here? What say you?
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