Figure 1 is a weekly chart of the Dollar Index (symbol: $DXY), and it is the same chart I have been showing for weeks. Not surprisingly, this week’s break above the downsloping trend line coincides with weakness in equities. The 74.62 key pivot becomes our new level of support.
Figure 1. $DXY/ weekly
The price action for the Dollar has been constructive from the bottoming process to the recent consolidation. But resistance is looming overhead, and it is rather significant suggesting that a break above these levels would deal a crushing blow to equities, which seem to trade in the opposite direction of the Dollar Index. This resistance can be seen in figure 2, a weekly chart of the Dollar Index, and it is defined by the following hurdles: 1) the 40 week moving average; 2) the key pivot at 76.28; 3) the up sloping orange trendline, which represents the prior breakdown point.
Figure 2. $DXY/ weekly
In sum, the price action in the Dollar Index is very constructive. Resistance remains significant and a break above would likely coincide with equity weakness.
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