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USDOLLAR Index: What Will Break It Free? We Don’t Know, Just Go with the Flow

USDOLLAR Index: What Will Break It Free? We Don’t Know, Just Go with the Flow

Paul Robinson, Strategist

What’s inside:

  • USDOLLAR index continues to be range bound between ~12050/11950
  • Market still selling at upper bound and buying lower bound
  • Range getting ‘long in the tooth’, be ready for a breakout

The USDOLLAR index continues to remain range-bound since the ‘Brexit’ spike. There have been a couple of catalyst since that event which could have popped the index free, but have yet failed to do so as the individual constituents – EUR, GBP, AUD, JPY – continue to offset one another.

The most recent dollar-centric piece of news which could have broken the range was the big headline NFP figure on Friday (287k vs 180k expected), but it did nothing more than push the index to the top of the current range and resolve back lower.

So what could send the USDOLLAR index higher in either direction? Your guess is as good as ours. We don’t know, just go with the flow.

From a trading standpoint, continuing to fade the upper and lower boundaries makes sense for as long as they continue to hold. But keep in mind the range is getting a bit ‘long in the tooth’ and will likely break sometime in the not-too-distant future. This would then require moving from acting as a range-trader to a breakout trader.

Given the direction prior to the range was strongly higher the current channel is viewed as a consolidation with a higher likelihood of breaking out to the upside. But, this should be reacted to not anticipated, as a downside break is also certainly possible. Predicting a range break can be bad for business.

The top-side level in focus for shorts is ~12050, while the lower bound for longs comes in at ~11950. A break of either side on a closing daily bar basis will warrant going with the momentum.

USDOLLAR Daily

USDOLLAR Index: What Will Break It Free? We Don’t Know, Just Go with the Flow

Start improving your trading today by finding out what characteristics make up successful traders in our trading guide, “Traits of Successful Traders”.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

Paul can be emailed at instructor@dailyfx.com with any questions or comments.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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