US dollar index is bearish against 97.00

Technical Analysis:

The US dollar index might have carved a lower high around 96.50 mark on Tuesday. The index dropped through 95.80 levels on Wednesday before finding some support. A break below 95.45 will accelerate further towards 93.00 in the next few weeks.

The index has carved an Evening Star bearish pattern on the daily chart after hitting 96.88 highs earlier. Also note that Elliott Channel resistance has been tested around 96.70-88 mark before reversing lower. If the above structure holds well, bears are expected to be back in control soon.

The US dollar index had dropped between 104.00 and 89.20, subdividing into five waves. The impulse drop has been marked as Wave (1) on the daily chart here. The subsequent rally has been corrective flat (3-3-5) towards 96.88 mark, which is potential Wave (2).

Also note that Wave (2) has travelled up to fibonacci 0.50 retracement of Wave (1), a general guideline of the Elliott Wave principle. If the above proposed structure holds well, the US dollar index should produce a sharp reversal lower toward 89.20 and further.

Traders might be inclined to initiate fresh short positions between 96.00 and 96.30 levels from here. Risk remains above 97.00 while potential target is below 93.00 mark at least.

Prepared by

Finacademy Technical Team