As we mentioned in previous posts, the Dollar index was inside a downward sloping wedge pattern. The RSI bullish divergence warning we got from price action made us have a neutral if not bullish stance against the Dollar as we still believe the downside potential of the index currently is limited.
Blue lines - bullish divergence
Despite the consecutive lower lows by price, the RSI continued making higher lows confirming the weakening bearish momentum. Price is very close to break out of the downward sloping wedge pattern. A strong bounce is expected by the USD as price has reached very close to the December 2020 lows. This is important support area for the Dollar index. At least a short-term bounce towards 91 is expected. Bears need to be very cautious.
