Since the beginning of the new 2020, the US dollar index (USDX) cannot determine the further direction of trade. As a result, we got an interesting technical picture.
From this point, the US dollar can both continue to grow in the long-term channel and begin a downward trend.
At the end of December 2019, the dollar index broke through the lower boundary of the long-term growing channel (black channel) and it seemed that a downward trend had begun. But the bulls were able to return the index back to the channel, making a false breakdown.
Now the dollar index has stopped at the upper edge of the medium-term declining channel (blue channel) in the immediate vicinity of the reversal resistance level at 97.350. The breakdown of this resistance up will lead to the exit from the declining channel and opens the way up for the bulls, up to a new index maximum at 99.200.
A decrease below 96.700 will allow the bears to develop the offensive and test the latest support at 95.930 and further, a strong long-term support zone around the round value of 95.00.
Let’s see how the battle between bulls and bears occurs on a larger timeframe. On the USDX hourly chart, we can clearly see how the dollar index returned to the long-term channel and, having tested its lower border, continued to grow.
However, the bulls failed with four attempts to take the resistance level of 97.150 (pink level) and the price went below support 96.670 (light green support line). And here we see the classic bear trap (highlighted by the circle number 1 on the chart).
The price returns above support and breaks the resistance at 97.150 on stops and forms a new maximum at 97.300.
And then the bears seize the initiative and take off their feet with the help of a bull trap, returning the price below the level of 97.150 (inside the purple circle No. 2).
It is in the immediate vicinity of this level that the US dollar index is being traded at the time of writing this review.
The nearest price movements can tell us the direction of further movement of the US dollar in the near future.
It remains to closely monitor the resistance at 97.300, support 96.700 and wait for a clear signal from your trading system.
Be prudent, observe risk management and trade in a plus.