( DJ ) 05/20 02:33PM =DJ CHARTING MARKETS: Hot Dollars, Cold Sweat
By Stephen Cox, CMT
A DOW JONES NEWSWIRES COLUMN
NEW YORK (Dow Jones)--One way or another, the Dollar Index's number is
coming up, and the upshot could be downright theatrical. Either the dollar is
going to be wildly bullish or bearish.
You've heard of market "fear indexes." I'm suggesting that the dollar is
about to become one of those indexes if it isn't already.
If I'm not misunderstanding the current situation, the dollar's uptrend is
influenced by what I call the "Roman Empire effect," that is, the
haven-seeking dollar buying on the assumption that the U.S. is the last, best
circle of economic security, much as Roman citizenship and Roman currency were
respected in another point of history.
I should say to readers, especially readers outside the U.S., who sense a
chauvinism in that analogy, that, after all, we all know what happened to the
Roman Empire. But I digress.
The technical point, in any case, is made by the daily chart of the last leg
of the Dollar Index's current uptrend which shows what is up with the dollar.

See chart at
http://www.dowjoneswebservices.com/chart/view/4007

The looming technical resistance at 87.806, I'd say, is liable to make or
break the dollar's uptrend. If the Dollar Index blows through 87.806 then
traders could seriously consider an eventual move up to 95.000-area technical
targets before this year is out. On the other hand, a failed test of 87.806
would be a strong caution signal to those planning to buy the dollar for any
reason.

See chart at
http://www.dowjoneswebservices.com/chart/view/4008

That 87.806 level is derived from the Dollar Index's annual chart. It may be
important to note that the Dollar Index's current powerful uptrend this year
is so far a correction of a downtrend that has been effective since the index
peaked in 1985 at 164.720. The simplest technical logic says that the 25-year
downtrend trumps the current half-year uptrend. Or, to put that thought in
other words, a decisive move above 87.806 would be a momentous technical
development.
Going back to the short-term technicals, I believe a test of 88.229 followed
by a decisive move below 87.806 would be a strong signal of a Dollar Index
The following story was published on Thomson ONE:
For information on Thomson ONE go to www.thomson.com/financial
failure. On the other hand, trading even slightly above 88.229 would have to
be notice that buyers of the dollar are playing in this market strictly at
their own risk.
(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.)
(Data by CQG)