The US dollar index might have carved a meaningful top around 96.20 levels on Wednesday. The index reversed lower thereafter, producing a Pin bar/Shooting Star candlestick pattern on the daily chart. Bears remain inclined to be back a=in control and hold prices below 96.20 going forward.
The index had dropped from 104.00 through 89.20 levels subdividing into five waves between March 2020 and January 2021. The above drop has been marked as larger degree Wave (1) on the daily chart here. Ideally, an impulse is followed by a corrective wave in the opposite direction.
The subsequent rally between 89.20 and 96.20 was a corrective zigzag (3-3-5) marked as potential Wave (2) here. If the above structure holds well, the US dollar index is looking set to reverse lower against 96.20 high. Bears remain inclined to break below 93.00 in the near term.
Also note that the index has managed to reverse from just below the fibonacci 0.50 retracement of Wave (1), which passes through 96.60 level. Potential remains for a drop below 89.20 in the next several weeks as Wave (3) progresses.
Traders might remain poised to initiate fresh short positions between 95.75-96.00 zones with risk above 96.20. Immediate price support on the daily chart is around 93.00 mark, which could be initial target.
Prepared by
The Profinacademy.com Team
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