Test time for US Dollar rally

It appears to be test time for the US Dollar, should a turnaround from its 12 month slide be in the cards.  The Dollar broke out bullishly from a flag pattern last week, only to be rejected at the 23% Fibonacci retracement of last June’s high.  But has now fallen all the way back to the supporting trendline from its May bottom.

The Euro has rallied back to the bottom of the flag pattern that it bearishly broke under last week.  It bounced hard off trendline support from last year’s bottom.  Will the Euro touch resistance and resume its recent downtrend?  Or will the longer term uptrend resume?

The answer, either way, is likely to be telling.  It’s worth noting that both agriculture (DBA as a proxy) and broad commodities index (DBC as a proxy) look like they broke to upside of short-term trendline resistance yesterday.  Is that a clue that the Dollar’s recent strength was a headfake?

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