The US Dollar Index broke below the support on Friday as hopes for an agreement in the European Leaders Summit pushed EUR/USD, the main component of the index, above 1.12. Hopes for an agreement was the main reason of weakness in the US dollar. However, we saw a sell the news behavior among market participants once the agreement was finalized.
Blue line- trend line support
The US Dollar Index tested the Ichimoku cloud support once it broke below the upward sloping trendline on Friday. The cloud support was held and today we see a backtest of the broken trendline, which is resistance now. Support is found at Friday’s low of 95.45. A break below this level will increase chances of a deeper correction towards 92.
Blue line- longer-term trend line resistance
The US Dollar Index managed to move above the long-term downward sloping blue trendline resistance last week, raising the chances of a new bullish move, however the week closed below the trendline. Despite the announcement of the agreement reaced in Europe, many analysts would expect the UD dollar to continue weakening. It seems that a sell-the-news behavior prevaile and most traders prefer to move to longs. The index has moved back above the tren-line resistance. The trend is bullish as long as the price is above 95.50.
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