The US dollar index pulled back towards the 97-96.80 area as we expected from our previous analysis. There are increased chances that the uptrend will resume strongly as soon as we are right above support area. A move lower in the US dollar index will put the bullish scenario in danger.
Black lines – bullish channel
The US dollar index is still trading inside the upward sloping channel as shown in the 4-hour chart above. The price has reached the Ichimoku cloud support and has stopped the decline. The short-term resistance is found at the kijun-sen (yellow indicator) at 97.55. Breaking and closing a 4-hour candle above this level will be a bullish sign.
Blue line – resistance
The weekly chart continues to remain bullish despite this week's red candle. The price has tested resistance and pulled back towards the kijun-sen support for a back test. Bulls want to see now a weekly close near this week's highs in order to be more bullish next week. On the other hand, bears want to see the price break below the kijun-sen at 96.80 but I believe this will be very difficult with commodity currencies and GBP/USD being under pressure.
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