Although the US dollar index was in a strong short-term bullish trend on Friday, it failed to close above the 97.50 resistance area and got rejected. The rejection caused weakness and the pullback got deeper towards the lower channel boundary of 96.50. The trend is bearish but with increased chances of a trend reversal.
Black lines – bullish channel
The US dollar index is in a bearish trend and in a difficult and crucial spot for bulls. The price is making lower lows and lower highs. The price is below the Ichimoku cloud on the 4-hour chart and was rejected at the kijun-sen (yellow line) resistance. The next support is at the lower channel boundary at 96.35. The most important support level is however the low at the 95.50 area made in early July.
Blue line – resistance
The weekly chart is getting dangerously bearish. The price got rejected at the blue trendline resistance and has now broken below the weekly kijun-sen support. Although it is early in this week's candle, breaking below the tenkan-sen (red line indicator) at 95.80 will be a bearish signal. Bulls need to step in and reverse trend otherwise the longer-term bullish scenario will be in danger. A break below 95.50 could imply that we could even see a new weekly low towards 90 as the form of the rise from 93.10 is corrective and not impulsive.
The material has been provided by InstaForex Company – www.instaforex.com