Dollar Index Ready To Roll Over? Bears Set To Takeover
And we are here again, the dollar index is at the top of our range at $97.50. Since October 2018, we have been range bound on the index, from $95.00 to $97.50. Now, we can’t blindly jump in and short all Dollar pairs just because it is at the top of our range, we need to confirm this on our lower time frames.
The daily chart has given us multiple confluences off of our weekly resistance area. We have an evening star followed by a hanging man off of our resistance area. Three confluences stacked already in our favour without dropping down into our lower time frames already. Dropping down to our 4-hour chart, we can see a nice head and shoulders forming, which is showing us a potential bearish reversal pattern. Our upward sloping trend-line has been broken to the downside, creating a new lower low on the 4-hour chart at $97.00. As we have now formed a new lower-low, our attention will turn to form a new lower-high, potentially around $97.35, this also coincides with our Fib region as well, if you were to Fib the recent high to new low.
How would you exploit the potential dollar weakness? The dollar index is 60% weighted to the Euro, so potential USD weakness would suggest Euro strength. Look for a potential reversal around $97.30/$97.40 on the dollar index, meaning EUR/USD could be about to push higher.
Within this potential trade idea, it is very clear to see where we are wrong, a nice clean daily close above our resistance of $97.50 would invalidate this trade....