Technically Speaking

The U.S. dollar index (USDX) looks to be at the crossroads between turning more bullish or returning to a downtrend. Last week saw the USDX post a new 4-week low of 88.94 before rallying to close 0.40 higher for the week at 89.97. Meanwhile, weekly stochastics have established consecutive bullish crossover below the oversold level of 20%, indicating the previous 3-wave downtrend has come to an end.

But that new 4-week low is troublesome for those bullish the dollar, like me. It would indicate that Wave 1 of the recently established 5-wave uptrend has already come to an end with the USDX failing to test initial resistance at the 23.6% retracement level of 91.93. If the USDX is indeed now in Wave 2, a near full retracement of Wave 1 would be expected, possibly beginning this coming week. What that means is the USDX could soon find itself back at its recent low of 88.25, looking for new buyers.

To track my thoughts on the markets throughout the day, follow me on Twitter:www.twitter.com\Darin Newsom