FX.co ★ #USDX Technical analysis for March 7, 2014

The Dollar index was forming a bearish flag, and at the 80 price level the flag was broken downwards with 79.25 target. The Dollar index after breaking the support has bounced to back test the broken flag trend line and now that it has been rejected at 80.15 it reversed lower making a lower low.

Short-term trend is down as the Dollar index makes lower lows and lower highs. The inability to break above the red downward sloping trend line from 81.30 is a bearish sign. The blue downward sloping lines represent the similar direction we were expecting the index to follow from 80.50 once the flag at 80 was broken.

The weekly chart is showing that the index is breaking below important long-term support. This could bring the index towards 79. If the weekly candle closes below the upward sloping trend line that is now at 79.90, then we can expect more weakness over the coming months and we should expect a move even towards 72-73. We are bearish in the short- and long-term as long as the index trades below 80.50.