Dollar Index False Break Confirmed We Look To Weekly Charts for Direction
As we enter the final day of trade for the week we are increasingly getting behind the idea that the break and close below the rising trend line support level early in the week was in fact a head fake, mirrored in Eur/Usd.
Despite the break of the bearish trend of successive lower tops in Eur/Usd the pair has resumed its downside moves with a vengeance since the false break early in the week making most now accept that it was in fact a head fake and the bearish structure remains in tact. As such, with the recent moves now assessed to be false breaks we must re-assess our immediate bearish outlook for the Dow Jones FXCM Dollar Index (ticker: USDollar). We feel that as we near the weekend it is prime time to take a step back and look at a weekly chart and see if we can garner a better picture of price action into the weekend and for next week.
On this weekly chart we can clearly see that the support still holds off the recent lows down by 9,320 with the dollar index on course to post its first bullish close in the last four weeks. Should NFPs provide a catalyst for further dollar gains then an bullish outside week could be on the cards. Looking slightly further into the future we see the range for the dollar index to trade in narrowing considerably as rival trend lines vie for control of the dollar index, this usually leads to a breakout – one way or the other. As things stand our bias remains slightly bearish, favouring a break of the trend line support and a test of range lows by 9,320. However, we are wary of the deteriorating situation on both sides of the Atlantic and fundamental developments in the US and EMU can (and will) dictate price action. Therefore, we suggest at this juncture standing aside while we await clearer signals.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.