First, let’s have a look on the longer timeframe, in this case the Yearly chart (chart1). The Dollar Index is in a long term correction up, currently halted between the 50% and 61.8% retracement levels, and the 100$ round number psychological barrier. The last year bar managed to take out the Yearly LHBL (Last High Before Low) at 92.53 (the blue line). This year started as a correction on an inner bar. Price is currently almost testing back this level, which should serve as an important support.
Chart1: Dollar Index, Yearly chart (at the courtesy of prorealtime.com)
Zooming in into the last 2 years period by the Weekly chart (chart2), we should see the importance of this line, as within last year’s price action the price has touched this line (point A), and skyrocketed to close the year higher. This time it is a test within the Yearly scale. So we shouldn’t rely on the same kind of reaction, but a rally back to the mid range, the 96.5 level, is very likely to happen.
Pay attention to the bearish signs though, the current yearly bar didn’t take out the Yearly high first, which is a sign of weakness, and the 20 SMA (yellow, mid Bollinger Band) is about to cross down the 50 SMA (blue) at point C.
Chart2: Dollar Index, Weekly chart (at the courtesy of prorealtime.com)
Short term actions: Best if we first get a small Weekly Lower Low, without coming too closer to the 92.53 line. Then, on a correction up towards the 93.6-93.8 levels, check for small term bearish signals to go short towards the support line at 92.53.
If the 92.53 is reached in the coming week, wait for some consolidation first (most likely it is not going to be sharp and volatile as it was the last time, at point (A). Good bullish signs after a consolidation most likely should start a short term trend towards the mid range, at point C (~96.5), but it is less expected to have a strong momentum move directly to that level.
Disclaimer: Anyone who takes action by this article does it at his own risk and understanding, and the writer won’t have any liability for any damages caused by this action.