March 15 Reuters Betting against the dollar was one of investors favorite trades at the start of 2021, but the U.S. currency is now recovering and technical analysis patterns from recent years suggest it could recoup a third or, potentially, all of last years 13 drop.

Charts show the 2020 fall in the dollar index was similar in magnitude, duration and price patterns to a 2017 slide that was followed by a recovery. If history repeats, the dollars 34month low in January could represent a bottoming that lays the foundation for gains.

This bullish technical potential was reinforced by this months surge in the U.S. currency, while interest rate moves, excessive dollar bearishness and macroeconomic factors such as COVID relief spending by the government and an accelerating vaccination drive should add support.

Traders use technical analysis to examine chart patterns and past behavior of prices, which can make it selffulfilling.

There are several similarities between the dollars COVIDdriven losses from last March and its January 2017 to February 2018 slide both lasted between 10 and 13 months and produced losses of 1315 from peak to trough.

One significant parallel appears when the Elliott Wave theory, a technical analysis tool that identifies patterns of rises and falls in financial markets, is applied.

The analysis can help identify when a major trend, such as last years dollar fall, might change. To reverse the downtrend, the dollar must close above a key point…