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US Dollar Moves Up toward Recent Highs

|Includes: PowerShares DB USD Bull ETF (UUP)

The US dollar index closed sharply higher today, moving into the upper half of the ascending triangle formation that has been developing since late March. An ascending triangle is characterized by a rising lower boundary and a relatively stable upper boundary, suggesting that buying pressure is stronger than selling pressure.

In this case, the upward slope of the lower boundary is not extreme, reflecting the slightly bullish nature of the formation. A close well outside of a triangle pattern usually signals the direction of the next meaningful move with a high degree of statistical confidence and today's advance suggests that a breakout is becoming more likely. In early May, cycle analysis correctly predicted the formation of an Intermediate-Term Cycle Low (ITCL) in the US dollar. The oversold reaction off of that low is now attempting to move up to a new high.

A breakout from the ascending triangle on the daily chart would reconfirm the oversold reaction from May and forecast additional gains in July, so it will be important to monitor price behavior closely during the next several sessions.

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