The strength or weakness of the U.S. dollar is influenced by four features. The first feature is the latest round of quantitative easing in the United Sates. The second feature is the inadequate solution to the "fiscal cliff" issue made at the end of December. A solution was achieved but many people believe the solution is only temporary and that it will lead to a U.S. recession. The third feature is the debate about lifting the U.S. debt ceiling. This requires a decision before the end of February. The fourth feature is the potential for more ratings agencies to downgrade the U.S. to double A rating.
These four features contribute to weakness in the U.S. Dollar Index. The index is a basket of currencies comprising the euro, the Japanese yen, the British pound, the Canadian dollar, the Swiss franc and the Swedish krona. The dollar index is used as a measure of the strength or weakness of the U.S. dollar.
(Read More: Picture This: The dollar at 100 Yen)
There are three significant features on the weekly dollar index chart. The first feature is the uptrend line that started in September 2011. One year later, in September 2012, the dollar index fell below this uptrend line. The weekly close below this uptrend line was the first signal of a significant change in the trend direction. This showed weakness in the uptrend, but it did not help traders to set long term downside targets.
