The US dollar index faces resistance around 94.30-40 levels as bears might be preparing to drag prices lower. The index is also seen testing the channel resistance as seen on the daily chart. High probability remains for a drop toward 91.50-92.00 level going forward.
The larger degree wave structure for US dollar index is also suggesting a classic Elliott Wave 5-3 pattern, which looks complete. The index had earlier dropped between 93.00 and 89.20 levels subdividing into five waves.
The drop was an impulse and is labelled as larger degree Wave (1) here. The drop also confirms that downside potential remains either from current levels (93.90-94.00) or from 97.00-98.00 respectively. The subsequent rally toward 94.55 has been corrective marked as A-B-C on the chart.
Either Wave C has terminated around 94.55 or lower degree Wave 1 of C is complete and that further upside still remains. Hence probability remains for a corrective decline towards 91.50-92.00 zone at least, if not further.
Traders might remain inclined to initiate fresh short positions around current levels (94.00), with risk above 94.55 and target below 92.00. A break below 93.50 would confirm and accelerate further downside.
Finacademy Technical Team
USDJPY could be progressing into a counter trend rally toward 114.30-50 zone in the next few trading sessions.
Gold dropped to $1770 mark on Tuesday before finding some support. The yellow metal is still testing its intermediate trend line support connecting $1721 and $1758 levels respectively.
The US dollar index carves a meaningful top around 96.88 mark over the last week. The index reversed sharply on Friday confirming a bearish Evening Star candlestick pattern on the daily chart.