The US dollar index spiked higher yesterday after the comments of European Central Bank president Mario Draghi and the plans to extend QE in the eurozone in December. Besides, the possibility of a rate cut by the ECB pushed the US dollar index higher.
Red line - broken resistance The US dollar index broke above the 4-hour Ichimoku cloud resistance and the downward sloping red trend line. The index has reached the previous highs at 96.50 and has paused its rise. Bulls need to be cautious as we could see a pullback towards the Ichimoku cloud in order to back-test the breakout.
Red line - weekly resistance Green line - weekly support The US dollar index has managed to break above the weekly Ichimoku cloud and is now testing the long-term red trend line. A rejection at current levels could bring the index back towards 93. The bullish flag remains intact and we still have no breakout.
On the H1 chart, the USDX has been trading above the support level of 96.30 with a higher high pattern formation, as the index had a very strong bullish momentum during Thursday's session. The current structure is fractal enough to state that the USDX will perform a rally towards the level of 97.02 when a breakout successfully happens above 96.56. The MACD indicator is entering the overbought territory.
The USDX is currently forming a higher high pattern above the support level of 96.85 after another bullish momentum gained during Friday's session. The 200 SMA is slightly bullish on the H1 chart and we expect a rally to unfold towards the resistance level of 97.51 following a breakout in the zone of 97.16. If the index starts making pullbacks at a current stage, it could fall towards the level of 96.56 in a corrective bias. The MACD is still at the positive territory.
H1 chart's resistance levels: 97.16 / 97.51 H1 chart's support levels: 96.85 / 96.56 Trading recommendations for today: Based on the H1 chart, place buy (long) orders only if the US dollar index breaks with a bullish candlestick; the resistance level is seen at 97.16, take profit is at 97.51, and stop loss is at 96.81.
The US dollar index has reached an important resistance area and a pullback is justified at current levels. Bulls should be very cautious in case the index makes full bearish reversal.
Red line - resistance The US dollar index is trading above the Ichimoku cloud. It has already broken the previous high of 96.50. A rejection at the resistance line of 97.25 could push the index back towards the Ichimoku cloud support at 95.50.
Red line -weekly resistance Green line -weekly support The USDX bounced from the Ichimoku cloud towards the upper bullish flag boundary and we can see a rejection. It is still too early to get bearish, but this is the level with the best risk-reward ratio. Stop for short positions is very close and a pullback towards the weekly cloud support is justified. Bulls should be very cautious and raise their protective stops.
The US dollar index got rejected as I had expected and mentioned in yesterday's analysis. It reached a very important resistance level. The pullback could continue today and even tomorrow as the Fed might keep rates unchanged and the greenback might become weaker.
Red line - resistance The US dollar index hit the resistance trend line and got rejected. The price is pulling back and we could see it testing the Ichimoku cloud. The thin cloud is not a good sign for bulls. Usually, when a thin cloud is seen, prices move towards it.
Red line -weekly resistance Green line - weekly support The weekly chart shows us how the weekly candle got rejected initially at the red trend-line resistance. We could see a pullback towards the cloud support at 95.70. The bullish flag pattern remains valid and we are waiting for a breakout. The long-term trend remains neutral as long as the price remains inside the trading range.
On the H1 chart, the USDX is currently trading slowly and waiting for the FOMC meeting. However, if a corrective move continues to push the pair lower, then we can expect a test around the level of 96.56 on a short-term basis. The MACD indicator remains at the negative territory, and that's why we recommend to be caution when adding long orders at the current stage.
H1 chart's resistance levels: 97.16 / 97.51 H1 chart's support levels: 96.85 / 96.56 Trading recommendations for today: Based on the H1 chart, place buy (long) orders only if the US dollar index breaks with a bullish candlestick; the resistance level is seen at 97.16, take profit is at 97.51, and stop loss is at 96.81
USDX technical analysis for October 28, 2015
The US dollar index is most probably making a short-term bullish flag but with limited upside potential. The USDX is well-supported by dollar bulls, but traders should be very cautious specially today since we are awaiting the FOMC meeting.
Blue line - support The US dollar index tested successfully the blue horizontal trend-line support, which was once resistance and got broken, This successful test implies that more upside should be expected today specially if we take into account the FOMC meeting scheduled for tonight. However, with stochastic at overbought levels bulls should be very cautious and use tight stops.
Black line - weekly resistance The US dollar index is testing the important weekly resistance line. This could turn out to be a big rejection and we could see prices pulling back towards cloud support near 95. Volatility is expected to rise tonight, so traders should be very cautious and wary of potential fake breakouts. A confirmed breakout above resistance will imply all pullbacks should be bought as the longer-term target is seen at new highs.
There is a sideways consolidation above the support level of 96.85 in the H1 chart. Ahead of the FONC meeting, we could expect some volatile moves in favor of the dominant bias, which is bullish. However, if the bearish scenario takes place after the meeting, we can expect a test at the 200 SMA zone in this time frame. The MACD indicator remains at the positive territory.
H1 chart's resistance levels: 97.16 / 97.51 H1 chart's support levels: 96.85 / 96.56 Trading recommendations for today: Based on the H1 chart, place buy (long) orders only if the US dollar index breaks with a bullish candlestick; the resistance level is seen at 97.16, take profit is at 97.51, and stop loss is at 96.81.
Technical analysis of US Dollar Index for October 29, 2015
Technical outlook and chart setups: The US Dollar Index has taken a pause after hitting yet another high at the 97.75 mark yesterday. The index is producing a bearish evening star candlestick pattern on the H4 chart, indicating a potential 3 wave correction lower before the uptrend resumes. It is hence recommended to remain flat for now and let the index break below the 96.50 levels at least for now. Immediate support is seen at the 96.50 levels, followed by 95.00, 93.75 and lower, while resistance is seen at the 97.75 levels (interim), followed by 98.25 and higher. Trading recommendations: Remain flat for now and look to buy lower. Good luck!
The US dollar index broke above important resistance levels yesterday after the FOMC had announced its decision to maintain rates unchanged. The current price action is very bullish in the longer-term, but bulls could expect a short-term pullback.
Red line - resistance (broken) The US dollar index has broken above the important resistance at 97.25. However, a rise from 93.80 can be seen, so we expect a pullback towards 97 in a couple of days to back test the breakout area or even towards the 38% Fibonacci retracement.
Red line - weekly resistance Green line -weekly support The US dollar index has broken above the weekly resistance trend line. The price is above the weekly cloud support. A long-term view has changed to bullish however we should be patient and see where this week's candle closes. With the US dollar index reaching a higher high, bulls are in control even if we make a pullback next week. Buy actions should be preferred with 94 as stop and targets of new highs.
