USDIndex: Yesterday's Break Above Short Term Bearish Resistance Bringing Index Close To Last Month's High
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 95.04 around time of publication.
Earlier this week when USDIndex was reviewed in Ideas You Can Trade on Monday, the trend was described as becoming more bullish, yet had subsequently traded lower before rebounding to current levels with yesterday's sharp move higher.
Yesterday's move broke above a short term bearish resistance line (red line on chart below), and brings the index closer to reaching its upside target near 95.75 (yellow line on chart below) where resistance may exist on last month's high. If the bearish resistance line overcame yesterday is breached to the downside again - the support area near 94.00 reached earlier this week could be revisited again - before testing higher.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 95.30 with a Limit to take profit @ 95.71 and a stop-loss @ 94.90 Risk/Reward Summary: Limit risk = 41 points profit / (-40) Stop-loss risk = Gain to Loss ratio = 1.02
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 94.74 with a Limit to take profit @ 94.19 and a stop-loss @ 95.02 Risk/Reward Summary: Limit risk = 55 points profit /(-28) Stop-loss risk = Gain to Loss Ratio = 1.96
Medium Term Daily Candle Chart: