USDIndex: Bullish Channel Continuation as Support Held After Recent Pullback in Uptrend
The daily candle chart below shows the medium term price history for the USDIndex - which is a contract for difference (CFD) that aims to track the underlying US Dollar index (DXY). Today the index is trading near 94.93 around time of publication -and near session highs and above yesterday's high.
Earlier this month when USDIndex was last reviewed in Ideas You Can Trade, the bullish channel had been re-entered from the upper resistance line, and support followed on the lower line of that channel towards current prices.
Today that support gained momentum with the index pushing back towards 95.00, and appears to be heading higher towards the January 23rd peak near 96.00. For now the trend looks to be turning more bullish again, although bearish resistance could emerge near today's high - which can be deduced by drawing a resistance line from the January 23rd peak to the February 11th peak (see red bearish line on chart) and which points to current levels.
If the current momentum continues up a steep bullish path, that prior high may be revisited in the very near-term (next few days/weeks), whereas a miss of that prior high could cause a more sustained reversal from current levels and if the support line of the bullish channel fails.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 95.11 with a Limit to take profit @ 95.69 and a stop-loss @ 94.62 Risk/Reward Summary: Limit risk = 58 points profit / (-49) Stop-loss risk = Gain to Loss ratio = 1.18
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 94.30 with a Limit to take profit @ 93.90 and a stop-loss @ 94.65 Risk/Reward Summary: Limit risk = 40 points profit /(-35) Stop-loss risk = Gain to Loss Ratio = 1.14
Medium Term Daily Candle Chart: