The Dollar index did not manage to break above resistance yesterday and pulled down hard making a new low. We expected prices to turn upwards, but as we noted, our bullish scenario would get confirmation only if prices manage to break the resistance levels. The sideways movement eventually broke downwards to new lower lows canceling the change in short-term trend to up. As we mentioned before, the intermediate term remains down. The short-term trend could not challenge the intermediate-term trend. Rejection at the resistance levels was a signal that the lows were going to be tested. Prices tested support and broke below those levels.
The sideways movement at the 61.8% Fibo retracement level broke down and now we expect prices to find support at the 76.4% Fibonacci retracement. This could be the last stand for bulls, as breaking below that price level is not very common for pullbacks. Nevertheless, the long-term trend as we mentioned before will change only if prices manage to break below 80. We still believe in the upward potential of the index and even if the pullback is so deep to reach 76.4%, we still believe trend will soon change. That is why we favor entering long as soon as resistance levels break.
The short-term trend remains down and as can be seen in the chart above, prices trade within the downward sloping channel. A bullish signal to go long and that trend is reversing will be if prices break out and above that channel. Therefore, important level to watch out for is the 82.30-40 price level. Breaking above that level will most probably confirm the trend is changing to up. Until then we remain neutral.
