Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

US Dollar Experiences Intermediate-term Cycle Low Setup

|Includes: PowerShares DB USD Bull ETF (UUP)
The US dollar index is now 21 weeks into the intermediate-term cycle following the Intermediate-Term Cycle Low (ITCL) in November 2010 and the next low will likely form sometime during the next few weeks, if it has not already. Both price oscillators experienced bullish crossovers last week, generating a cycle low setup.

A subsequent weekly close above 76.20 would generate a confirmed cycle low signal and indicate that the latest ITCL is in place. As we noted in the latest big picture update, the index closed below the lower boundary of the symmetrical triangle formation last month, signaling a potential long-term breakdown and continuation of the secular decline from 2002.

It will be important to monitor the development of the rally off of the forthcoming ITCL, as a weak reaction followed by a quick return to recent lows would confirm the long-term breakdown and forecast additional losses. Alternatively, a strong move higher during the next two months would return the index to the symmetrical triangle formation and once again suggest that long-term direction is in question.