US Dollar Index support seen around $89.60/70

Technical Analysis:

US Dollar Index seems to be producing a complex corrective drop since $91.60 highs and is expected to find support around $89.60/70 levels before resuming higher again. The indice had formed a major bottom at $89.20 on January 06, 2021.
The rally between $89.20 and $90.50 can be counted as clear 5 waves, making a potential impulse or Wave A of a correction. The subsequent price action until today is seen as a series of 3 waves, making a potential W-X-Y combination.
If the above is correct, US Dollar Index is unfolding Wave C within Wave Y lower towards $89.70 at least. Also note that fibonacci 0.786 retracement of the entire rally between $89.20 and $91.60 is also seen around $89.70 mark.
Hence probabilities remain high for a bullish turn if prices manage to reach $89.60/70 zone. That could be marked as a potential Wave 2 as labelled on the 4H chart here. If the above structure unfolds accordingly, US Dollar Index might be set for a Wave 3 rally thereafter.
Alternately, a drop below $89.70 might re-test lows at $89.20 or even print below that in the short term, before finding support again. The alternate count carries less probability though and a bullish reversal should be seen from around $89.70 mark.
US Dollar Index bulls are looking poised to gain control back from $89.70 and push through $94.50 mark, provided $89.20 remains intact, going forward. We remain bullish on the index for now and await a turn soon.

Prepared by

Finacademy Technical Team