USD Index (DXY) Monthly Reversal Signal

The USD Index (DXY) remains in a bear cycle and in July pierced a key long-term support at 96.55 - a trendline drawn from the May 2011 low. Trend signals highlight a number of important technical conditions.  

• On a monthly, weekly and daily scale, an oversold condition has been highlighted .  
• This does not mean that a trendline break (if confirmed) isn’t important and that the downtrend cannot extend.
• However, the oversold position does raise the possibility that either; a correction unfolds soon, or that the pace of the trend slows down. 
• As is always the case in such situations, the momentum/oversold position is merely a warning sign for chartists. A reversal signal in price is required to highlight a base.
• July could prove to be a key month. Based on the close, a bullish engulfing candle pattern has developed.
• This is regarded as a strong reversal signal and the fact that it has occurred at the trendline, strengthens the importance of the pattern.
• Furthermore, it also suggests that the daily, weekly and monthly time scales are in sync - a bullish signal.  
• Key support is at the July low of 96.38 and this price point represents an important pivot point.