US dollar shows signs of potential development

The meeting on the sidelines of the Nuclear Security Summit conference between President Hu Jintao and US President Barack Obama discussed the relative value of the yuan and the dollar. It took place against an interesting background in currency markets where opinion is supported by real money. In the last few days money has been walking away from the US Dollar.

The US dollar index is a measure of the currency's strength or weakness. During the last week it has plunged from $0.82 to near $0.805. The move above $0.82 had the potential to develop a uptrend move to $0.85. This failed to develop. The dollar index failed to sustain the upward momentum. It fell below the most recent up trend line starting in December 2009. Recently a weak rebound developed from near $0.81 but the uptrend line now acted as a resistance level. The dollar retreated quickly from this level showing a potential to retest support near $0.795.

This behavior signals several potential developments.