USD: Looking toppish

USD: Looking toppish

USD index has formed a "flag" ("ABCD"). The indicators are negative, with MACD cutting below the MACD signal line earlier and now fast approaching the zero line plus the ADX dropping below 20 (signaling weakness in the uptrend). If USD index were to drop below the lower liner ("BD"at 96), the flag formation will turn into a double top reversal. Thus the uptrend in USD index would be over.


Chart 1: USD Index's daily chart as at April 24, 2015 (Source: Stockcharts.com)

The weekly chart below also shows weakness in the uptrend, with MACD just cutting below the MACD signal line and the ADX weakening alongside a declining +DI and a rising -DI. We can see the USD index has been well-supported by the 10-week SMA line since the rally began in July 2014. The 10-week SMA line (currently at 97) will be another important marker to check for the direction of USD index for the next few days or weeks.


Chart 2: USD Index's weekly chart as at April 24, 2015 (Source: Stockcharts.com)

The question is why is USD weakening now. Is it due to technical reason, such as overbought? Or, is it due to economic weaknesses which may delay the much-anticipated monetary tightening in the US? We will have to wait & see.

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