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FXstreet.com (Barcelona) - Since USD index bottomed around current levels at 80.39 back in 2004, from the big fall started in 2002 around the 120 level, it has been flipping around this mark ever since, last at 79.48. Since Sept last year the index has moved inside the range between 81.44 highs, and 78.65 lows, "trading in a tighter and tighter range as the market continues to form a contracting triangle/pennant over the last few months," says David Solin, analyst at FXA.

Based on Elliott Wave Theory analysis, David suggests USD index will ultimately break lower in the near term, below the solid 79 demand line, but just to form a bottom, where "lots of support lies just below the Sept low at 78.60 in the long discussed 78.10/40 support area," the analyst says, and reverses around there to the upside again. US 10 year bond yields are finding also good demand above the recent 1.9% 8-month highs, last at 1.84% off mentioned 1.93% highs.

Immediate support to the downside for USD index lies at recent session and Friday's lows 79.43, followed by Monday's weekly and 7-day low at 79.34, and 3-month low Dec 19 at 79.00 round. To the upside, closest resistance shows at Dec 05 lows 79.58, followed by yesterday's highs at 79.65, and Dec 12 lows at 79.71.

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