Dollar Index Testing Head And Shoulders Neckline
Alexandros Yfantis | Jan 15, 2013 05:13AM ET
The dollar index is heavily influenced by price movements in the euro. Our bullish view on EUR/USD, as shown in previous posts, is connected to our bearish view of the potential of the dollar index. There is a pattern forming in this index that, if exploited, could provide us with a good, low risk profit.
As shown in the chart, the dollar index has likely completed a head and shoulders formation:
It is important to see now if the dollar index will break the head and shoulders neckline, in order to activate our trade idea. When prices break the necklines of head and shoulders patterns, they extend lower - as much as the height of the head. Another sign of weakness in the dollar index is the inability of buyers to push prices above the purple pitchfork resistance and above the ichimoku cloud resistance.
In conclusion, this pattern may need some time to develop as we expect it. Now that we identified it, there is only one thing to do: sell, if prices break the neckline of this pattern.
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