The Dollar index was very volatile yesterday as expected by our analysis. The Dollar index first dipped below the 79 price level as we expected by yesterday's analysis but Draghi's comments have brought strength into the US Dollar and a short-term reversal took place. The Dollar index has bounced towards 79.50 but the long-term trend still remains downward. Now, the only difference is that with the ECB ready to take action in June, markets are trying to discount any strength in the US Dollar and a large-scale reversal is quite possible.

Short-term resistance is found at 79.65 where the downward sloping trend line is as well as the Ichimoku cloud. A break above that level will increase chances of a larger reversal in the trend. The short-term trend is bullish but strong resistance at 79.65 will test bulls.

The longer-term trend remains downward despite the upward bounce we saw yesterday. The price still remains below the Ichimoku cloud in the daily chart and the downward sloping trend line resistance. Yesterday's reversal day was a good bullish indicator but it is still too early to tell that a bigger reversal is taking place. Yesterday's low is very important. If broken, we will see the Dollar index move lower towards 78. Bulls to start a bigger reversal, will need to break above 79.85 on a daily basis and then above 80.40.