Hello and welcome to CantosCharts. My name is Eoghan Leahy. I'm a Technical Analyst and trader with Fat Prophets.

Today we'll be looking at the dollar index. So if we move straight into it, long-term chart here shows us the monthly trend. So over many years the trend has been down and it recently broke with the low in 2008. Since then we've tested higher and are now currently re-testing resistance right around the $90 level.

Now I guess the key is, is this resistance going to break, will we see a sustained move higher, or are we going to test some levels?

Now moving in through the timeframes we can see here on the daily chart this is the recent channel higher has been tested to the upside. Now is this a breakout or will we be seeing a reversal of this level?

Now, as you can see, we've marked in what looks to be a head and shoulders pattern. Right along the 23.6 per cent Fibonacci is the neckline of this pattern which has now recently been broken on higher volume which would suggest a move lower. We can take a projection from the neckline to the height of the pattern which gives us about a $350 target lower. So we might see a move back down to the bottom of this uptrend channel right around the 50 per cent Fibonacci retracement level. So this is what we would be looking for.

Moving on again, this is an Ichimoku cloud. Now to explain an Ichimoku cloud simply, let's just focus on we have the lagging line and we have the cloud. The cloud essentially mirrors the trend line. It's like an oscillating trend line. So you can see at present we're once again testing the cloud. Now we would need to see a break of the lower band of the cloud to define a new trend, which means there is still scope for a move down around our target area and rebound back towards an uptrend.

So if we keep moving through here again, these are some more trend indicators. We have a MACD indicator and also a parabolic stop and return. Parabolic stop and return is a trending system that it is always either long or short the market.

So we can see at the moment we have a sell signal from the parabolic and also from the MACD. So we're definitely dealing with a downtrend here. The question is how far a move might we see.

So if we have a look here, we have some oscillators. First we have a Bollinger band, nine period RSI, MACD histogram and slow stochastic set on 1033. Now if we see here, we had a higher high in the dollar index which coincided with the throw over of our channel, but we also have here a lower high on the RSI, a divergence in the MACD and a sell signal in the stochastics.

So although we're seeing a higher high, we had early signs of a trend reversal which has since ensured.

We move on here, this is a form of analysis we quite look but wouldn't be that common. It's a point and figure chart. What this does is it takes the noise out of the market and it's very good for generating projections. So we can see here prior to the recent breakdown we had reasonable downside projections around the $82.8, $84.5 level which is suggesting, almost tipping us off that this head and shoulders pattern was going to break to the downside.

So finally what we'll do is have a little look as a trader on a short-term basis.

If you're looking to get short the dollar index and you think that this head and shoulders pattern could lead to a sustained move lower, well what you want to do is sell the bounces here.

So here we're looking at a 60 minute chart. We can see this is a recent breakdown. We had an overbought reading on the RSI. As soon as RSI dips back below $70, this is a good sell area. Again, testing the upper band of the channel overbought RSI. As soon as we get that dipping back below that level again, a good sell opportunity. We've marked on here what looks like a small continuation pattern, so we think we'll see a decent test of this channel lower and perhaps a move towards the $81 level in the dollar index.

So that's been it for the dollar index. Tomorrow we'll be covering the VIX, the CBOE volatility index, so please come and join us.