U.S. Dollar Needs to Form Support Base

Sure there was volatility, but everyone expectedthat but for the most part, the Fed’s policy statement announcement in myopinion was a non-event.

Sure there was volatility, but everyone expected that butfor the most part, the Fed’s policy statement announcement in my opinion was anon-event. Technically, shortly after the news was released, the Dollar Index plungedto a new low, but the quick rebound to almost unchanged for the day indicatesto me that the move was most likely triggered by thin trading conditions.

Although the rebound did not produce a closing pricereversal bottom, it did come close, indicating that perhaps the shorts have runout of gas or there are buyers out there. Spike moves are usually not goodindicators or major bottoms unless there is follow-through to the upside. Thismakes Thursday an important day.

The U.S. Dollar may have hit support on Wednesday, but aspike bottom is not a good sign of a major bottom. The Greenback needs to forma support base because my technical works says that the height of the rally isdetermined by the length of the base. Without good structure rallies are likelyto fail. This being said, continue to look for weakness in the Dollar until itcan establish a support base.

One other clue suggesting a possible bottom will be takingout the last swing top on the daily chart at 78.51. Or better yet, the previousmain top at 78.61. Unless this market starts taking out shorts to attract thebuyers, continue to look for lower prices.

Another key indicator of a possible major bottom will be aweekly closing price reversal. All the components are in place for a reversal.We have a prolonged move down in terms of price and time. Now all we need is ahigher close, close above the week’s opening and a close above 50% of theweek’s range. Last week’s close was 77.46. Watch for the bears to defend thisarea if tested, but don’t get excited about the long side until the bulls canregain this price.