The U.S. dollar index advance is showing no signs of slowing down. Early in Asia, the greenback continued its move higher as expectations grow for Federal Reserve to raise rates this summer, while German yields are expected to remain low for a considerable time as the ECB begins purchasing bonds.
With QE remaining in place for Japan and just beginning in Europe, the dollar could see another major move higher in anticipation of the Fed moving rates forward.
Price action on the US dollar index weekly chart shows that the three week rally is tentatively breaking out above the 200.0% Fibonacci expansion level. If price is able to stay above the $98.31 level, we could see a clear path towards the 261.8% Fibonacci level at $99.83. It is around that area that we could see a bearish ABCD pattern form and trigger a round of profit taking before the next advance.
In the event we see price consolidate or exhibit some downward pressure, key support will come $96.00 support region.
The trade: Buy US Dollar Index at 98.70 with a stop loss at 98.20 and a take profit at 99.70. The Risk/Reward Ratio is 1: 4
Edward J. Moya
WorldWideMarkets Online Trading