Lets sing again:- USD is another banana notes

During the past few years it is almost our daily dosage when we open up the newspaper or on our TV - practically every 'experts' had been telling how the once mighty USD is fast becoming another banana notes (Banana notes are those used by the Japanese occupational forces during the WW2. They became almost worthless after they lost the war) Then came the "surprise" bull rally in August 2008 where all the 'experts' again placing the blames on the "black swan" . Generally they all got stunned and remained stoned in silence.

One thing for sure - they could NOT "explain" to you why the USD rallied with the US fundamentals were in fact getting worse.

Lets be brutally frank about it, they are unable to see it coming. But not us who practice technical analysis. We saw the return of the bull , just as we also see the current demise of the USD in around late February (see my essay on GBP ) . Like they say:- the writings are on the wall. Yes sir. When I see bullish/divergences formed in the charts, I get cautious and start to tighten stops on my positions and I also start to look forward for major reversals. Of course as all things in life, nothing is 'guaranteed' as in the case of divergence. It does NOT say whenever they form, that market will guarantee to turn the big corner. BUT, I get more cautious.

Here I am taking a look at the USD Index chart where there is a bearish divergence formed between the prices and the MACD (higher price peaks and lower MACD peaks) plainly forewarning that the USD is about to get weak against a basket of other major currencies. Last few days , it broke down below the lower Bollinger Band which is confirming to us that this market is gone for good. MACD has also crossed down below its zero signal line giving us another confirmation of the bear.

I would pay attention to the rising ADX which is telling us a trend is forming.

In the weekly chart, a bearish divergence is also found at the MACD and the Stochastic. a divergence is usually found in the weekly chart when the market is staging a brand new major trend. We should be seeing some really big moves from here. Both the indicators have already crossed down thus offering initial sell signal. If by today closing and price goes below the lower Bollinger Band, it will be a major sell signal on the weekly chart. We could easily see it going back to 79.00.

Since the current crisis started, many 'experts' have lost their job. Maybe we can get them back up to their prior task of singing in chorus that the "USD is becoming the banana notes" song ?