Technical outlook:
The US dollar index rose through the 107.49 high intraday on Friday before reversing sharply lower. The forecast of the last week suggested that the index would top out. The price is plotting a potential shooting star candlestick on the daily chart signalling a reversal ahead. A break below the 103.15 initial support will confirm a top and reversal as bears come back strong.
The US dollar index has rallied religiously since January 06, 2021, after hitting the 89.20 lows. The price has carved a series of higher highs and higher lows and reached 107.49, a potential top. The entire rally looks complete and ideally should be retraced at least towards the 94.00-95.00 zone, which is close to the Fibonacci 0.618 levels of the above growth.
The US dollar index has carved a recent cycle between 101.08 and 107.49 levels, with 103.15 as the median support. Also, note the immediate trend line, which is expected to break, once prices drop below 103.15. We can confirm a bearish reversal thereafter as bears target below 103.15 and 101.00 in the near term.
Going forward:
The US dollar index is looking well poised to resume a larger-degree corrective wave lower towards 101.00 as the initial target. It should be ideally followed by a corrective wave followed by another drag lower towards the 94.00-95.00 zone. Also, note that each high recently has been accompanied by a strong bearish divergence, which is a potential reversal signal. We shall look forward and confirm the price action over the next week.
Trading plan:
Potential drop to 101.00 against 108.00
Good luck!
