The US Dollar Index has been trending higher since early May. This Great Graphic, created on Bloomberg, shows that it has been successfully tested several times.
And it looks like it's ready to re-test in the coming days. It came in on Monday near 94.80 and looks to rise a little more than two ticks a day to finish the week near 94.90.
Technical indicators like the RSI, MACDs and Slow Stochastics suggest there is a reasonably good chance that the trend will be violated.
We see two main scenarios. The more benign of which is that the violation is a function of a broad sideways movement. In this case, the immediate target is 94.45 -- the low from the September 8 upside reversal. Below, there is the congestion from the second half of August in the 94.05-94.25 area.
The other scenario warns of deeper losses. It notes that the pullback in the second half of August already completed the 61.8% run-up from the early May low (~91.90) to the late July high (~97.57). Under this scenario, the USD's gain since mid August was a correction of the down leg from late July. The late August high -- and last week's high - stalled near 96.25, a corrective retracement target. The risk is a return to the 92.00-93.00 lows from Q2.