THE U.S. DOLLAR INDEX, which tracks the dollar against other major currencies, fell below its important June low of 78.33 late last week. On Monday morning, it was trading at an 11-month low.

The bear trend from March continues with no meaningful support in sight.

Roughly two years ago, when the dollar was in its previous bear market run, the dollar index had moved under a multidecade support level at 80 (see Chart 1). At the time, the subprime-mortgage crisis was just unfolding.

Chart 1

After reaching a low near 71, the dollar spent several months moving sideways until July 2008. Although still several weeks before the stock market started its slow motion crash in September, fear had gripped the world's financial markets. Stocks and corporate bonds were spiraling lower.

But it was just then that the dollar began to rise sharply. Money was moving to the perceived safety of U.S. Treasuries and that sparked the demand for dollars.

When the dollar index moved back above 80, chart watchers with a long-term bent declared a breakdown failure and the technical resurgence of the greenback. Although volatility was huge, the index remained above the 79-80 zone to set up a floor of support. As of Monday, that floor is broken.

With the benefit of hindsight, we can see that financial and economic turmoil was the real culprit on the dollar's volatile comeback. Now as economic news improves and the appetite for riskier investments such as stocks returns, the dollar's appeal is gone. Indeed, we can see in the chart that the final peak in the dollar was roughly equal to the bottom in the stock market.

The big flaw, however, in using the dollar index to forecast trends in the dollar is that it is comprised of a strange basket of other currencies. Further, more than half of its weight is devoted to the euro and that makes it less representative of all capital flows into and out of the United States.

For example, nearly 8% comes from Sweden and Switzerland yet consumers here send a huge amount of money to China and other Asian economies. This is not reflected at all in the basket.

I'll let others debate what should and should not be included. The point is that analysis of the dollar basket is nearly the same as analysis of the euro. Let's take a more focused look at a few others via domestic exchange-traded funds (ETFs).

Last Friday, the CurencyShares British Pound ETF (FXB) broke out to the upside from a two-month pattern called an ascending triangle (see Chart 2). This pattern has a flat top and a rising bottom border and suggests that the bulls were getting more aggressive. When prices moved higher, the buy was flashed and a new move higher began.

Chart 2

As commodities have been firm, many analysts often look toward the currencies of so-called resource-based economies. The Australian dollar is one such currency and the CurrencyShares Australian Dollar ETF (FXA) has been in a steady rising trend since March (see Chart 3).

Chart 3

Last month, when the both the stock and commodities markets were moving lower, the Aussie Dollar held its ground. And when both of these asset classes began their rebounds, the Aussie Dollar ETF soared to fresh highs for the year. Currently, the trend is up and momentum is strong without registering overbought conditions.

In the new global economy, growth has been driven by the so-called BRIC countries of Brazil, Russia, India and China. It is interesting to note that of the four, only Brazil's currency has shown new rally highs although India is not far behind. The Brazilian real, that country's currency, broke out from a two-month trading range about two weeks ago.

Trend shape, speed, momentum and even the fundamentals support a classically well-structured rally. Unfortunately, the Brazilian Real ETF is too thinly traded for prudent investors to touch at this time leaving this as a supplement to the weak dollar argument.

Not all major currencies are this strong vs. the dollar, as the Japanese yen has been more or less pacing the greenback for weeks. But when compared to the most actively traded currencies around the world, from the euro to Canada to Sweden, the dollar is currently in rough shape.