Technical outlook:
The US dollar index dropped through the 101.88 low on Monday before finding interim support. The index has pulled back since then and is seen to be trading close to the 102.10-15 zone at this point in writing. Also, note that initial support has been taken out at 102.30 as bears register themselves to be back in control. Watch out for a short-term pullback rally from here.
The US dollar index could reach up to the 103.75 mark in the next few trading sessions, which is close to the Fibonacci 0.618 retracement of the drop (not shown here) between 104.88 and 101.88 respectively. Ideally, prices should stay below 104.88 to keep the bearish structure intact. Once the counter-trend rally is complete, we expect a turn lower.
The US dollar index has produced a strong rally between 89.50 and 104.88 in the past several weeks. A minor drop through 99.00 remains possible with the Fibonacci 0.382 retracement passing through. Having said that potential still remains for a drag lower through 95.25 levels going forward. Selling on rallies remains a safe trading strategy for now.
Trading plan:
Potential drop to 99.00 against 105.00. Short-term rally expected through 103.75 before turning lower.
Good luck!
