USD index testing its downtrend line

The recent rally in the US Dollar (USD) index has caused the index to test its medium-term downtrend line resistance at 76.5 mark last Thursday. You can see that the USD index peaked in March or at the height of the recent Global Financial Crisis. Since then, it has been trending lower in a downward channel (see the parallel pink lines, ABCD). Within this downward channel, a secondary downward channel can be seen. Since June, the USD index was trapped in the secondary downward channel (depicted as parallel green lines, WXYZ). A breakout above the 76.5 mark for USD index could have serious impact on the price of many commodities. However, I do not see this as a probable event, given the precarious fiscal position of the US government. The recent rally is likely to be an oversold rally after USD's recent sharp decline. USD may be getting some buying support from many central banks, especially Asian central banks, which are worried about the value of their USD reserves & their export to the US markets.


Chart: USD's daily chart as at Oct 30, 2009 (Source: Stockcharts.com)