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Talking Points:

The Dow Jones FXCM US Dollar Index may have initiated a substantial downward reversal after prices broke below a trend guiding the uptrend since July 2011. Sellers are now testing the 10375-79 area, marked by a double bottom and the floor of a falling channel set from early June. A daily close below this barrier would initially expose the June 2012 high at 10323. The trend line – now at 10404 – has been recast as near-term resistance. A move back above that clears the way for a test of the channel top at 10434.

While the breakdown is an ominous sign for our long-term outlook favoring US Dollar strength, it seems prudent to wait for confirmation on a break of the double bottom before bailing on the trade. With that in mind, we remain long via theMirror Trader US Dollar currency basket.

US Dollar Technical Analysis – Bearish Trend Turn at Hand?

Daily Chart - Created Using FXCM Marketscope 2.0

** The Dow Jones FXCM US Dollar Index and the Mirror Trader USD basket are not the same product.

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com