USD Index Finds Buyers

This daily chart of the USD Index shows a market that is in a strong downtrend, but has shown some recent relative strength. The move up through the upper trendline does not constitute a change of trend but does imply a change in sentiment....for the time being anyway. This is likely a result of the flight to safety play taking place in the financial markets right now. During times of uncertainty, traders move to markets that offer safety rather than potential big returns. That usually means a move to the short-term US Treasury market. One needs to buy US Treasuries with US Dollars, so first these traders must sell the currency they are currently holding and buy the USD. That pick up in safety interest is most likely what caused this move up through the trendline. Further buying interest could be the result of a falling US stock market or geopolitical events. However, in the absence of the flight to safety, the USD index does remain in a strong downtrend with more downside expected.