The last few trading days brought us a reversal on the US dollar index. Could this be the end of the rally, or will the USD remain on the uptrend?
The dollar Index’s recent weakness can’t be attributed to the shift in the euro (as we know, the euro weighs the most in the dollar Index basket). Yes, it had a significant impact, but the USD is currently trading a bit lower on the vast majority of instruments (including commodities, JPY and CHF), and not only against the euro.
Technically, the situation on the chart is rather negative. We have a false breakout (yellow) above the previous highs (96.8 green), which was the main technical trigger for the sell-off. The price also broke the uptrend line (blue), but that’s irrelevant because we can see that this line was broken recently too (red), which shows that buyers won’t sacrifice themselves to defend it.
As for the current target, it seems that the orange area around the 38.2% Fibonacci level can be a great aim for the sellers in the mid-term. Breakout of that support would be a major sell signal in the long-term, but as for now, it is a bit too early to foresee that.
The 38.2 Fibo is the first target for sellers right now, and that’s our mid-term scenario for the dollar Index at this moment.
