March U.S. dollar index futures on the New York Board of Trade on Tuesday hit a fresh six-month low of 82.82. Prices are in an accelerating downtrend from the mid-October high of 86.78. Bears have quickly gained strong downside technical momentum. Veteran currency traders know that the greenback has a tendency to sell off heading into the end of the calendar year. Currency veterans also know that trends in the currency markets generally tend to be stronger and longer-lasting than price trends in the commodity markets.
The next downside price objective for the dollar index bears is closing prices below solid technical support at the contract low of 82.35, basis March futures.
For the bulls to regain some near-term technical footing, they would have to push the index back above solid chart resistance at the 84.00 level. However, the bears can correctly point out that the U.S. dollar index is now short-term oversold, technically, and due for at least a corrective upside bounce very soon. The 14-period Relative Strength Index overlaid on the daily bar chart for the March U.S. dollar index showed a reading of 21.66 on Tuesday morning.
click on the chart to enlarge
Any RSI reading below 30.00 does suggest a market is overdone on the downside, on a short-term technical basis, and due for a corrective upside bounce soon.
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