Click on the warning marked Cypress Dongle name. You should be able to see the reason why it is not being connected.
I would say that you are using an older version of the CySmart Dongle HEX file. Use PSoC Programmer to update the CySmart Dongle HEX file. You can get the latest one from http://www.cypress.com/file/139636/download .
Now, it works.