The US dollar index spiked through 96.85 mark on Wednesday on the back of the Federal Reserve interest rate decision. It remained shy by just three points of the critical technical resistance at 96.88 mark, and reversed sharply lower to close around 96.30 mark.
Looking at the recent price action since 96.88 highs on November 24, the US dollar index has managed to carve a classic Elliott Wave pattern. The drop between 96.88 and 95.40 was in five waves marking an impulse Wave 1 on the daily chart.
The subsequent rally has been corrective three waves toward 96.85 mark, carving potential Wave 2. If the above is correct, US dollar index bears should be back in control and drag prices lower through 93.00 mark as Wave 3 unfolds, going further.
Alternatively, if bulls are able to break higher above 96.88 consistently, it would open the door to test 98.00 resistance before reversing lower again. Also note that the fibonacci 0.618 retracement of earlier drop between 104.00 and 89.20 is passing close to 98.00 levels.
At the time of writing, traders might remain inclined to hold short positions against 97.00 levels. The near term target potential remains close to 93.00 levels.
Prepared by
The Profinacademy.com Team
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