The dollar index suggests that the greenback is currently trading at a very critical point where a big move either way will determine the next 10 points. Treasury Secretary Tim Geithner today rejected the theory that the government is trying to devalue the dollar, saying that "it is very important for people to understand that the United States of America and no country around the world can devalue its way to prosperity, to (be) competitive." From my experience, when government officials start making statements to support their currency, the currency normally heads lower because the market loves to punish verbal interventions. On the other hand, the "Obummer" administration actually wants a weaker currency as politicians continue to believe that a weaker dollar will benefit exports. The truth is that this country simply does not manufacture enough to benefit from the dollar devaluation.
From a technical perspective , the USD/CHF cross has always had a close resemblance to the dollar index, and the pair has broken down from the symmetrical triangle, and therefore, I am expecting a similar outcome for the dollar index. If you agree with my analysis, I believe EUR/USD and AUD/USD remain the best bets.
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