This is a 20 year chart of the traded US Dollar Index. This index is computed using a trade-weighted geometric average of six foreign currencies against the dollar.
Many traders in the stock, commodities and currency markets use Technical Analysis (TA). TA suggests that, based on human behaviour like "herding" and basic market dynamics, certain price pattern develop and can be plotted. Such pattern have been observed in many charts and experience allows predicion of future market behavior when distinguished pattern occure.
The blue line of the monthly US Dollar index value forms a smaller scale and a bigger scale head and shoulder pattern. A left shoulder, a head and a right shoulder are visible, as are two necklines. The smaller head and shoulder pattern is marked in green and the larger one marked in red.
The red neckline is incidently also the (so far) all time bottom or support line, of the USD index value.
Technical Analysis suggests that a distinctive break of the neckline of a head and shoulder pattern results in a movement of the same absolut value and direction than the difference between the head of the pattern and the neckline itself.
The top of the HS pattern was at about 122 in early 2001. The green neckline at 94 broke in late 2002. This suggested a fall of (122-94 =) 28 points below the neckline to (94-28 =) 66.
A break of the red neckline suggests a fall of (122-81 =) 41 points below the neckline at 81, leading to a US Dollar Index value of (81-41 =) 40. Today’s international purchase value of a US$ 1.00 would be down to 50 cents. The time horizont for reaching that level may be the same than the time distance between the heads top and the neckline break, in this case 3 to 5 years.
Currently the US Dollar Index is some 82.46. If the current downtrend continues, the neckline will be broken by the middle of next week. A more typical behaviour could be a short few month bump off the neckline followed by a downturn that significantly brakes that line and closes the pattern.