US dollar index reverses lower from 94.62

Technical Analysis:

The US dollar index has reversed from 94.62 high, after testing its previous swing high at 94.55 level. The index is testing its channel resistance at the time of writing as potential remains for a decline through 91.50 mark in the next few weeks.

The index had earlier dropped from 103.00 highs through 89.20 lows since March 2020. The above drop subdivided into five waves carving an impulse, which is marked as Wave (1) or (A) on the daily chart. Ideally an impulse is followed by a corrective wave before resuming the higher degree trend.

The US dollar index had rallied from 89.20 through 94.55-62 mark, subdividing into three waves labelled as A-B-C here. The termination of potential Wave C could be larger degree Wave (2) or (B). If the above is correct, the index is preparing to drop below 89.20 in the next several weeks.

Also note that bulls have tested the Elliott Channel resistance twice around 94.55-62 mark. If the above structure holds well, prices are expected to stay below 94.62 and drag lower. A break below 93.20 will confirm and accelerate further.

Alternatively, the US dollar index still be progressing within Wave C towards 97.00 and 98.00 levels. In that case we could see a corrective drop toward 91.50 at least before the rally resumes. Either way, potential remains for a drop from here.

Prepared by

Finacademy Technical Team