USDIndex: Steep Recovery Since Support Held Above 93.00 and Intersecting Bullish Lines Helped Lift Index From Last Week's Low
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 95.76 around time of publication - a sharply higher for the 3rd straight trading session.
USDIndex was last reviewed in Ideas You Can Trade just last week when the bearish trend had brought prices lower towards 93.00 and where support was expected to be tested. Since then support indeed held above 93.00 and the index has since bounced higher quiet strongly with a return towards current levels in just the last few days.
Today's high pushed briefly above a longer-term 50% Fibonacci line (around 95.75) which also coincides with the January high of 95.75 - where resistance exists (and is a level that could turn back into support if regained).
Last week in the above mentioned post, a correction in a down-trend was described as likely, and if the steep momentum fails to continue then that downtrend may resume, although the USDIndex could still pullback slightly before continuing a real-recovery higher.
Although the last few days have been sharply bullish for USDIndex, only yesterday did it escape the bearish channel (orange parallel lines) that can be seen on the first chart below.
Therefore, a small pullback should be followed by either the very bullish bounce continuing higher, or the bearish channel re-entered and a return towards 93.00. Either way the USDIndex seems to be just emerging from a crossroad (following yesterday's exit to the upside of the bearish channel).
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 96.01 with a Limit to take profit @ 96.45 and a stop-loss @ 95.64 Risk/Reward Summary: Limit risk = 44 points profit / (-37) Stop-loss risk = Gain to Loss Ratio = 1.18
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 95.30 with a Limit to take profit @ 94.77 and a stop-loss @ 95.66 Risk/Reward Summary: Limit risk = 53 points profit /(-36) Stop-loss risk = Gain to Loss Ratio = 1.47
Medium Term Daily Candle Chart:
Medium Term Daily Candle Chart (zoomed-out):