The US dollar index is seen to be trading within a tight range between 95.80 and 96.30 levels since last few trading sessions. The index might have carved a meaningful top around 96.88 mark as bears are looking inclined to drag prices lower in the near term.
The index might have carved a lower degree Wave 1 around 95.40 and potential Wave 2 around 96.30-40 zone recently. If correct, bears might resume Wave 3 lower towards 93.00 and beyond. It would also confirm a bearish trend reversal against 96.88 mark.
It should be noted that the index has produced a classic Elliott Wave pattern, which is fives waves down followed by three waves up between 104.00 and 96.88 mark respectively. If the above proposed counts hold well, the US dollar index should produce another five waves lower towards 89.20 at least.
A break below 93.00 will confirm that trend has reversed for good and bears are back in control. Potential remains for a drop below 89.20 mark, but we shall look into it after 93.00 is taken out. If the lower degree counts are correct, prices would stay below 96.88 and turn sharply lower soon.
Traders might be willing to initiate fresh short positions from current levels (96.35-40) with risk above 96.88 mark. Near term target potential remains below 93.00 levels.
Finacademy Technical Team
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