Rumors of the dollar demise continue to be greatly exaggerated, to paraphrase Mark Twain. Price bounced off the bottom in May from positive divergence October 2010 thru May 2011. Note the upward channel in place now, higher highs and higher lows. Price would need to fail 74 to ruin this constructive upward moving chart. Price is now sitting on the 50 MA so the days ahead will determine if this support holds. Notice that price can fall lower and simply use the bottom rail of the channel as support and bounce from there.
The blue lines show the Inverted H&S, head at 73.0, neck line at 76.2-ish, thus, a target of 76.2+3.2=79.4-ish. Price needs to pierce up thru the neck line and once it does, the dollar will not look back. The neck line provided a temporary ceiling since the 76.0-76.5 area is resistance going back to November 2010, thus, it is expected to take a few tries to poke up thru. The next move up should do it.
The red lines show some subtle negative divergence, the MACD histogram showed the strongest negative divergence, that spanked price back down from the neck line. The indicators, however, show that higher lows are in place corresponding to the higher lows that form the channel, thus, the negative divergence is viewed as a minor set back, not something that will push the dollar down towards collapse.
Projection is the dollar will break up thru the neck line, then up towards 79.5-ish, then ultimately, 81 will be in focus as the year plays out. So the broad market indexes will enjoy some buoyancy in the near term as the dollar places a bottom in this 74-75 area, but the dollar will move back up, busting up thru the neck line and onward and upward, which means the markets will be in further trouble as the year plays out, probably prompting Chairman Bernanke to step in with QE3.
For USD chart use search box above for keystone speculator or view at stockcharts public charts list keystone speculator.