US DOLLAR

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GENERAL OVERVIEW OF US DOLLAR INDEX MARKET

ISSUE DATE: JUNE 02, 2006

Whenever a market fails to finish a cycle and instead breaks out ahead of the end, this almost always tells us the next trend will be in the direction of the break. In this case the break is down through IC3 so we would expect DX to fall fairly rapidly to target 2, or at least IC4. IC4 could provide the support for a major bottom but we think it more likely the LEC line will be touched somewhere along its length.

With that said, we would point out that the IC3 cycle really doesn't finish until June 5 so there is a chance DX will quickly cover ground lost on June 2 and close very near 85.00. But the fall on June 2 does look like a permanent break of IC3. However, if DX did finish in cycle end IC3, it would above strong support from the C lines and from here M1 would be capable of forcing a rally up it.

Immediately after June 5, DX will come up against M1 and this line will put upward pressure on price and we could see a rally to the C lines, and if DX can break up over these, a continuing rise is likely up M1.