Dollar Index False Break Forces Re-Think of Short-Term Outlook
We spoke Tuesday about the mounting prospects of a move to test range lows by 9,320 after the break and close below the rising trend line support off those range lows. However, the Dow Jones FXCM Dollar Index (ticker: USDollar) has since reversed course forcing us to take another look. After the Eur/Usd broke out of its bearish series of lower tops early in the week the pair is increasingly looking like it made a false break and has since resumed its downside moves. The same can be said for the index, we now suggest that the break and close below the support was in fact a false break with the index now holding above the trend line support.
While this doesn’t shift our medium-term outlook for the index, which remains bearish favouring a test of range lows in coming days and weeks, it does shuffle our near-term analysis. We now believe that with the support line back in play and the break below in the early week written off that we need to see a sustained break and close below the support line for get us excited about any imminent downside break. We will additionally watch the moves made by Eur/Usd for directional bias, if it continues to bearish resumption into the end of the week we may need to re-assess our medium-term outlook early next week.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.