US Dollar Index Technical Set-Up Very Bullish

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The chart above is the US Dollar Index. It shows a retest of the November low. Remember in November the QE II was announced. And it was presumed that such an event should be bearish for the dollar because it is inflationary. However, the market rallied in typical contrarian fashion.

The technical set-up shows a running bullish divergence on the daily MACD. The prior bullish divergences are highlighted on the chart as well. Also the RSI (10) shown is at a second and stronger divergence on this minor dip to new lows. The last couple significant bottoms in the dollar showed a similar set-up where at the price low, the RSI (10) could not even touch the oversold 30 level.

The current decline also looks like a possible ending diagonal type movement which is an explosive chart pattern that should retrace to the beginning of the pattern (January high in this case) in about 1/2 of the time of the decline, or even faster.

This suggests serious strength in the US Dollar and serious weakness in commodities beginning very soon if this signal is of similar caliber to the last two like it. Sentiment and real money commitment of traders data suggest a bullish move ahead also.