The US dollar has spent the last three weeks in a choppy decline as investors await to see if the Fed will give a clear sign on when liftoff will occur. If we are led to believe that Fed will raise rates at the September meeting, the U.S. dollar may see a strong round of bullish momentum.
The end of May rally made a key high at $97.88, which was the second major lower high that price made since the record bullish rally stalled at the March 13th high of 100.785.
Price action on the 240-minute chart is showing that a confluence of support may come from $93.80 - $94.25 region. If the bearish retreat continues, we may look for a major bullish reversal to stem from both a potential bullish Gartley and Butterfly patterns. Initial upside targets include the 100-day SMA, which is trading at $96.34. Major resistance will once again come from the century mark.
If the short-term bearish trend continues and invalidates the reversal patterns, key support will come from the $93.00. A breakdown below there could see the currency pair target the $90.00 handle.
The trade: Buy Dollar Index at 94.00 with a stop loss at 93.50 and a take profit at 96.00. The Risk/Reward Ratio is 1:4.
Edward J. Moya
WorldWideMarkets Online Trading