I refer to the post I made on November 14, 2009, in which I warned about a bullish divergence that had been building over the past months between the USD index and the RSI and MACD indicators. I said that "this kind of technical divergence can lead to a sudden and powerful rebound of the US dollar at anytime, which would lead to a violent decline of the equity and commodities markets".
This is exactly what happened as we have seen the USD index going from 75 to 78 today and the EUR/USD decreasing from 1.50 to 1.42 today. My system tells me now to go long the US dollar as the 20 day moving average has crossed the 50 day moving average to the upside (see above chart).
I also refer to my post of November 29, 2009, in which I mentioned that the US dollar index was in a rising wedge technical formation and that it would either go below the support at 74.0 or strongly rebound above that level. The latter occurred. We now have a clear target price for the USD index around 86-87.
