Dovish Fed minutes have further weakened the USD and it has continued its retreat after recently topping out at a major monthly resistance trend line. Whether this is a short term dip before further bullish continuation or a reversal of trend is not clear just yet but there is one key level to watch that may help to gauge this outcome.
USDX 4hr: this index had been consolidating above daily support prior to FOMC:
USDX daily: FOMC minutes will now see the index close below this daily support:
USDX weekly: a weekly bearish engulfing candle is still forming:
USDX monthly: a bearish reversal monthly candle is also still forming:
Fibonacci levels can help traders to target possible pull back levels. Placing fibs on the daily chart for the recent 3 month bull run reveals an interesting alignment. The 61.8% fib level is a popular target in pull back moves and is often noted as a ‘demarcation’ level. That is, any close and hold beyond this levels marks a trend reversal. The 61.8% fib for this bull run would bring price back down to the region of the 81.50 level. This has been a key level for the USDX as it was major resistance and the top of a trading channel for 11 months from Sept 2013 to Aug 2014. Thus, the 81.50 level is a key for the USD index due to the alignment of this 61.8% fib and recent S/R history.Â
USDX daily + fibs: placing fibs on the recent bull run shows a 61.8% pull back would bring the index down near the key 81.50 level. Note I have fibbed from the last swing low to swing high:
I would be expecting any pull back on the USDX to target this key S/R and fib level BUT any close and hold below this level would suggest that this move is more than just a pull back and a possible reversal of trend. Thus, for me, the 81.50 level is the key level to watch on this index as a ‘line in the sand’.Â
Summary:Â
- the 81.50 level is a key S/R level for the USDX and also the region of the 61.8% fib of the recent bull run.
- A respect of 81.50 would suggest that this is just a pull back move before possible further bullish continuation.
- A close and hold below the 81.50 would suggest that this is a trend reversal and the USDX might continue ranging within the monthly symmetrical triangle.
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