USDIndex: Support tested on yesterday's low and additional intersecting support lines failing as pullback deepens to 93.00
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 around 93.34 around time of publication.
At the end of last month the pullback had already been underway and reached 95.00, as described in the last post about USDIndex in Ideas You Can Trade, and has subsequently traded lower despite experiencing brief recoveries to the upside - before moving towards current levels.
Since then the pullback has deepened further and hit 93.14 yesterday where support is being tested. In addition, a number of intersecting bullish and bearish support lines around current levels are failing, and is an indication that a bearish continuation will unfold if 93.00 fails.
If support is regained above current prices, and along the intersecting support lines, then a recovery in the downtrend could enable an upside correction -followed by the downtrend resuming shortly thereafter. Otherwise, if a bottom is reached around current levels - a larger recovery of the bullish US Dollar momentum of the previous few months could return, although this latter scenario seems more distant then the current bearish reality for the greenback.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 94.06 with a Limit to take profit @ 94.63 and a stop-loss @ 93.50 Risk/Reward Summary: Limit risk = 57 points profit / (-56) Stop-loss risk = Gain to Loss Ratio = 1.02
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 93.14 with a Limit to take profit @ 92.62 and a stop-loss @ 93.66 Risk/Reward Summary: Limit risk = 52 points profit /(-52) Stop-loss risk = Gain to Loss Ratio = 1.00
Medium Term Daily Candle Chart:
Longer Term Weekly Candle Chart: