The Dollar Index although it initially retraced 23.8% and showed signs of possibly moving lower towards 82, the speech by Mario Draghi pushed the major component of the Dollar Index (EURUSD) to new lows and, thus, affecting the index. Prices initially tested the 82.50 resistance, pulled back but eventually made a new higher high. The recent price action although had broken down of the short-term upward sloping trend line, it was now back testing it by making a new high.
Trend remains up and as long as prices are trading above 82.40 there is nothing for the bulls to fear. There are signs that the entire upward move from 81.10 is near its end or has already topped, but prices are still supported and we could very well see a new higher high. The long-term trend channel is upward sloping and despite the possibility of a downward correction, the momentum is up and we believe that it will remain up in order for the index to challenge the 84.85 area.
Prices in the daily chart are trading above the MA resistance levels and near the 50% retracement. We still believe that a pull back is very possible but our view remains bullish. Support is found at 81.80-82 and that is an area where we will enter long again. The formation from the lows in August looks impulsive. This is a good sign for bulls as prices will be expected to continue higher after a 3 wave downward correction.
Concluding, we prefer to exit positions near the 82.60-70 area and raise stop for bulls the 82.40. We believe that the end of this upward move is near. Nevertheless we should not forget that our main price target is 84-85 and we favor dollar strength in the long run.
