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The market has not been decisive with the direction of the USD so far in 2012, although there is some bearish bias. In the short-term we can say by looking at the 4H chart, that the USDX is trading down in a bearish channel after anchoring out of a bullish channel. Still if 79.00 holds as support and the market is seen respecting a previous support pivot at 79.10, and the 61.8% retracement (at 79.11), then there is some bullish bias in the short-term back toward 80.72, or perhaps the 81.00 handle. This would of course require a break above the declining channel. A return above 80.00 would clearly do so.
We should also take a look at the daily chart. We see that the market is now trading sideways after a slide in January. This is going against a rising trendline that started in August 2011. A tighter one form the Oct. 2011 low is about to be tested. There is some space to the downside toward the 77.80-78.00 area before the test of the lower trendline, which is in confluence with the 200-day simple moving average. A break below 77.50 would be seen as a break below the trendline and 200-SMA, and would bring a bearish outlook. 76.70, and then more aggressively the 74.80-75.00 area are the targets to the downside.
Otherwise, there is still some bullish bias, although we can say the market is sideways. A break above 80.50 should clear the declining trendline, and if the market can stay above the convergence of SMAs (100, 55, 21, near 79.60, then the bullish bias builds toward the 81.60-82.00 highs (81.60 was resistance Jan 2011, and Dec. 2010).
Also note that the RSI is stuck between 40 and 60. Momentum in the daily time-frame is also awaiting for breakout.
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Fan Yang CMT is a trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.