The US dollar index rallied through 96.88 levels on Wednesday, a bit higher than the expected 96.65 mark. The index has now tested fibonacci 0.50 retracement of the larger degree Wave (1) as labelled on the daily chart here. High probability remains for a bearish reversal from here.
The index needs to break below 96.20-96.00 zone to confirm the initial step of a potential bearish reversal underway. Furthermore, prices would carve a bearish candlestick pattern just around the Elliott Channel resistance line.
The US dollar index is displaying a classic Elliott Wave pattern of fives waves down, followed by three waves up between 104.00 and 96.88. The impulse wave is marked as Wave (1) around 89.20, while subsequent corrective rally is marked as potential Wave (2) around 96.88 on the chart.
If the above structure holds well, the US dollar index would reverse lower from here (96.70-80) soon and proceed lower through 93.00 and further in the next several trading sessions. Potential remains for the decline to reach beyond 89.20 going forward.
Traders might remain inclined to initiate fresh short positions around 96.60-80 zone with risk above 97.00 levels. Potential target could be seen below 93.00 and 91.20 in the medium term.
Prepared by
The Profinacademy.com Team
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