A technical look at the US Dollar

Following are some price charts of the US Dollar to give an overview of where it stands from a technical analysis perspective. We will look at all three major time frames, the daily, weekly and monthly as well as a shorter term 4 hour chart.

Let's start first with the daily.
As you can see, the Dollar is trading firmly below all 4 of the major moving averages that I have charted here; the 10, 20, 40, and 50 day. All are trending lower with the 10 day having just completed a bearish downside crossover of the longer 20 day moving average. This tells us that the market is in a decided downtrend as all the moving averages are speaking with the same voice.

The market has moved down right into a major chart support level near 77. On Friday, it briefly penetrated that level but then rebounded and managed to close higher on the day, but just barely.

I should note here that the particular technical indicator I am referencing in this study, the Relative Strength Index, or RSI, is showing a slight loss of dowside momentum and is registering a very faint bullish divergence signal. To validate this signal, the Dollar would need to pull off a strong close above 77.90.

Summary - the market is weak, trending lower but attempting to hold here. Whether it can or not remains to be seen as we head into next week.

Next is the weekly chart:

There are several things to note about this time frame. First all of the same period moving averages, 10, 20, 40 and 50 week moving averages are moving lower confirming the weak pattern. The shorter 10 week moving average however is above the 20 week but is now pointed lower. It made a bullish upside crossover of that same 20 week average on the end of the year rally but once the market failed to extend past the 50 week moving average and turned down it too began moving lower. It has not yet made a bearish downside crossover of the 20 week but is very close to so doing.

The RSI is confirming the weakness in the market as it failed to muster enough strength to even clear the 60 level on its rally of the last few weeks of 2010. This is textbook bearish action when a market in a prolonged bear trend stages a relief rally which cannot pull the RSI above the 60 level. I will not be convinced that there is anything significant going on with the US Dollar until and unless its weekly RSI reading can move past 60 and preferably 65.

Summary: - market is bearish with no signs of positive or bullish divergence with that being confirmed by an RSI reading signaling a bear trend. Price is sitting on top of a weekly support level, which if it cannot hold, will send the RSI down further adding confirmation to the bear move.

By the way, note the huge double top formation spread across two year's time up near the 90 level.

Then we move to the monthly chart:
As with the daily and the weekly charts, the price is trading below all of the major moving averages, 10, 20, 40 and 50 month. These moving averages however are not reflective of a market in a trending move but rather one in a sideways congestion pattern. Note that the shorter term moving averages are actually above the longer term averages but are all pointed lower. In other words, the market is not trending on a very long term basis.

This is also reflected by the RSI which is moving roughly between the 60 and the 40 level. Any pattern like this on the RSI is a congestion pattern with no clear trend.

Summary: The market is basically moving sideways but because price is currently below all of the major moving averages, the bias is to the downside.

Finally we come to the shorter term, 4 hour time frame:
What we see here is a market that tested support near 77 and uncovered buying which took it slightly above 77.50 before it ran out of steam. If the market is going to push higher early next week, it will take out the resistance zone noted on the chart with its top just below 77.60. The RSI is bearish and will remain so unless it takes out its blue overhead line at 60.