Technical outlook:
The US dollar index continued to rally on Wednesday posting a fresh swing high close to 107.00 before pulling over. The index is tracing close to 106.60 at this point in writing and needs to break below 103.20 at least to confirm a potential reversal. Ideally, a break below the 101.08 initial support will confirm that bulls are back in control and are here to stay for long.
The US dollar index has produced a continued rally from the 89.20 lows since January 06, 2022. The series of higher highs and higher lows might be complete close to 107.00 or it is very close to completion. The upside remains limited from here and a break below the immediate support trend line and 103.20 will be the first step towards a bearish reversal.
The US dollar index might be at a critical juncture to have approached closely 107.00. Please also note that the last two swing highs around 104.88 and 105.52 have been accompanied by a strong bearish divergence on the daily RSI. This could be seen as a potential trend reversal going forward and a break below 103.20 confirms its first step.
Going forward:
The US dollar index has rallied for the last 18 months and could be nearing its termination at around the 107.00-50 zone. Although most traders might still want to remain bullish, it is good to stay cautious and prepare for a potential bearish reversal from here. Let 103.20 break first, and then prepare or begin to sell on rallies thereafter.
Trading plan:
Preparing for a bearish reversal soon
Good luck!
