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Talking Points:

The Dow Jones FXCM US Dollar Index is attempting to launch a recovery after putting in a Bullish Engulfing candlestick pattern above double bottom support set from October 2013. A daily close above resistance at 10405, the intersection of the 23.6% Fibonacci retracement and a recently broken trend line set from July 2011, exposes a falling channel top at 10419. This is followed by the 38.2% retracement at 10431. Alternatively, a break below the outer layer of double bottom support at 10354 exposes the 61.8% Fib expansion at 10302.

This week’s trend line break is an ominous sign for our bullish long-term US Dollar outlook but waiting for confirmation on a breach of the double bottom seems prudent before calling the reversal. We remain long via theMirror Trader US Dollar currency basket for the time being.

US Dollar Technical Analysis – Trying to Find a Lifeline

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