CHARTING MARKETS:Dollar Soldiers On, Dollar/Yen Generally Weak

By Stephen Cox, CMT
A DOW JONES NEWSWIRES COLUMNNEW YORK

Dow Jones)--In general, it's the specifics of technical analysis that will come back to bite you.

Specifically, is the weak dollar/yen cross discounting a downturn of the Dollar Index? That may be the case if dollar/yen falls below a nearby technical support level.

The dollar is generally strong Thursday. That's not news given the uptrend of the Dollar Index since November. The Dollar Index, as of this writing, is trading near 80.900, and so is close to the top of its uptrend since November. See chart at

http://www.dowjoneswebservices.com/chart/view/3521

On the other hand, what may turn out to be newsy is an imminent downturn of the index given its recent test of the 81.163-82.820 resistance band, which, I believe, may include an important top.

If the dollar is set up for a downturn then I wonder if that event is being anticipated by Thursday's conspicuous weakness of the dollar/yen cross as shown on the daily chart. See chart at

http://www.dowjoneswebservices.com/chart/view/3522

In contrast with the Dollar Index chart above, this chart shows that the dollar's uptrend against the yen beginning in November broke down in January. I estimate that the dollar is going for Y88.01 target support, which may be an interim bottom. If such a bottom doesn't materialize then the dollar would be going for support at Y86.34.

In any case the dollar is weak below Y90.77, which now is the nearest stop for trades based on the daily chart.

The question without a clear answer is this: Would a dollar move below Y88.01 more or less coincide with a Dollar Index fall away from the 81.163-82.820 resistance band? If that turns out then the dollar/yen will have anticipated a general downturn of the dollar.

There's always the prospect of a big dollar bounce from Y88.01 and corresponding Dollar Index move above 81.163-82.820 resistance of course. The point is that the answer may be as close as the dollar is to Y88.01.

(Stephen Cox, a chartered market technician, is chief technician for Dow Jones Newswires. He can be reached at 212-416-2212 or by email at stephen.cox@dowjones.com.)