USD US Dollar Index Weekly Chart Oversold Falling Wedge Positive Divergence FOMC Meeting

US Dollar weekly chart since 2008. Weaker dollar=stronger commodities=stronger equities. The commodities bubble peaked in July 2008, note the green circle which shows when Trichet raised the ECB rates and then had to quickly back pedal from his error. Trichet raised again a week or so ago so will history repeat? Note how the positive and negative divergences play a key role over the last four years and how commodities tops directly correspond to dollar lows.

ADX shows how the down move in 2007 into the 2008 low was a very strong trend, but now, for the current move down in the dollar, not so much, in fact, the current ADX trend is not as strong as it was when the dollar was falling last year. The importance of the nearly four year 2004 horizontal support at 74 cannot be understated. The black circles show a stronger RSI as price has weakened over the last 3 1/2 years.

The reason that Chairman Bernanke is disinterested in the weakening dollar is visible by the fact that the dollar was weaker (72-74) during the prior commodities bubble in 2008; he may figure the dollar can fall another couple bucks before he would be concerned. The commodities chart are now negatively diverged which jive with the positive divergence above which says dollar up=commodities down=equities down.

The answer is coming this week, the Superbowl for the US Dollar, the FOMC meeting begins Tuesday, Bernanke has his first Q&A session on Wednesday afternoon, surely a reporter will ask Bernanke's view on the weakening dollar at 2:15 PM EST 4/27/11, so consider this to be the fourth quarter of the game. Interestingly, Bernanke will also speak after lunch on Friday, perhaps to remedy any trouble from Wednesday?

The dollar is ready to bounce but the only person in control now is Bernanke and what he says about a strong, or weak, dollar policy this week. The chart illustrates how violent the dollar price moves can be.  The dollar moved up over 20% in only about four months in 2008 after the commodities bubble popped.  Another 20% pop from late 2009 into 2010 as the end to QE1 was contemplated, and now, as we contemplate the end to QE2......., well, Bernanke will light the way this week, does he fumble or punt? This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or any links connected to this information. Consult your finanical advisor before making any investment decision.