Last week we mentioned that our outlook on the dollar index was positive. We concluded the previous analysis as follows:
“The buy signal is on and will be here as long as the price stays above the 23.6% Fibonacci. The 61.8% Fibonacci is the crucial resistance and our current target. A small bearish correction may be triggered if the price makes it there, but the overall trend should remain intact – buy."
That was a great call considering the fact that the index is climbing higher making higher highs and lows. We've officially ended the correction stage and we are in a legitimate upwards trend. The most recent development on this instrument is a wedge (red lines). This is not just an ordinary wedge, but one that has a double bottom pattern on the support and a breakout of the upper line of this formation, also breaking the horizontal resistance. This resistance is represented by the blue line on the 95.7, and was crucial at the end of August and the beginning of September. If the Monday candlestick closes above the blue area that will be significant confirmation of a buy signal.
Positive sentiment will remain here as long as the price stays above the lower line of the wedge. A bearish correction could take place if we fall below this line.