Technical outlook:
The US dollar index has carved a potential Tweezer Top candlestick pattern on the daily chart after it conquered 104.06, the 20-year high registered on Monday. It could be seen as a probable trend reversal from here as bears are ready to re-enter the market. Ideally, prices should stay below 104.06 to keep the structure intact.
The US dollar index has initial support around the 102.30 mark as labeled on the chart and a break lower will confirm that trend has reversed and a meaningful top is now in place at 104.06. Until that happens, prices remain vulnerable to yet another shallow high towards 104.50 and 105.00 levels going forward.
It should be noted that the recent swing high at 104.06 is accompanied by a strong bearish divergence on the daily RSI as presented here. This phenomenon is also a potential trend reversal as bears remain poised to break below the 102.30 support. Aggressive traders might be inclined to initiate fresh short positions from the current levels.
Trading plan:
Potential drop towards 102.30 and 99.65 against 105.00
Good luck!
