USDX: tide turned? by Mary McNamara

The USD index weakened on Monday and this follows on from w/e commentary that the Fed might not be in such a hurry to raise interest rates. I noted yesterday that I am seeing a potential bearish H&S pattern setting up on the 4hr chart. This follows on from a bearish weekly candle and I’m wondering if the long awaited pull back might be starting.

USDX 4hr: a potential bearish H&S forming on the 4hr chart and the ‘neck line’ is sloping the correct way for this bearish set-up. This pattern is forming under the huge resistance of the monthly bear trend line. Price broke down through a daily support trend line last week and hasn’t been able to recover above this level:

USDX4

USDX 4hr Cloud: the index is still below the 4hr Cloud:

USDX4hrCloud

USDX weekly: I noted this bearish weekly candle on the w/e but what I failed to emphasise was how this configuration gave a bearish-reversal ‘Railway Track’ appearance. This pattern formed under the huge resistance of the monthly bear trend line: 

USDXweeklyCloud

Railway Track patterns:

Railway Track

USDX daily: the daily chart shows that a 61.8% fib pull back of the recent bull run would price back down to near the 81.50 and this is a region of previous strong resistance. The 81.50 will be a key level to watch if there is such a deep pull back as this will be a demarcation point for this move:

  • A respect of this 81.50 level would suggest that this was most likely a pull back before bullish continuation.
  • A continued move below 81.50 would suggest that this bearish move is more of a reversal than just a pull back:

USDXdaily

EURX: by contrast, this continues to range trade within a descending trading channel:

EURXdaily

Summary: I am looking for a possible USDX pull back to at least the 81.50 level. Any such pull back will be under close scrutiny from there so a so to determine whether this is a short term pull back or a reversal of trend.

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