US Dollar Index Testing Key Support

The Dollar is flirting with some dangerous levels here. This support right around 79 represents the potential neckline for a head & shoulders pattern that would confirm a continuation of the downtrend.

After rallying into last summer, the US Dollar got hit hard into September. Since then, it has been building this interesting, yet bearish, pattern that looks to be resolving to the downside.

Here is the chart of the US Dollar Index Futures:

The 2.5 point height of the pattern would give us a measured move down to about 76.5 upon completion. The Euro strength lately cannot be denied, and looking at this chart above it's easy to see why.

We'll certainly be watching this chart closely as US Equity markets tend to correlate negatively to the US Dollar. The 1 yr correlation is about -0.70 with the S&P500 and -0.70 for the quarter as well.

Stay tuned...

Tags: $UUP $DX_F $SPY $SPX $EURUSD $FXE