The Dollar Index Has Topped
Alexandros Yfantis | Nov 01, 2016 06:45AM ET
With the possibility of rates increasing in December by the Fed, the dollar index is found at its 9 month highs. Price has reached important resistance of 99 price level and several indicators point to a bearish reversal at least towards 96.50. This is not the time to be bullish the dollar. EUR/USD the major component of the dollar index is also turning upwards (negative for the dollar index) and a major low could already be in.
Another important component of the dollar index is the USD/JPY which also shows signs of a bearish reversal (negative for the dollar index).
The dollar index has already made a bearish weekly candle last week and yesterday’s bounce was not strong enough and we are already breaking below last week’s lows.
The dollar index is at overbought levels giving bearish divergence signals. Price has broken out and above the weekly cloud resistance but has reached the upper trading range boundary at 99.50. The bearish reversal we see now should at least back test the breakout area of 96.50. A move below the weekly cloud support and the upward sloping green trend line (now at 95.8) will be a very bearish signal that will imply a push towards 92 is very possible.
Elliott wave wise the entire rise from 91.90 is not impulsive, BUT could unfold to something impulsive. For the time being both bearish and bullish wave scenarios are equally possible but a break below 96.50 will cancel all Elliott wave bullish scenarios. Combined with the bearish technical view of current market situation, I prefer to be bearish.
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Concluding, I’m bearish the dollar right now and have short positions in the dollar index. My preferred scenario is a push even lower than the 92 price level. 96.50 is key support level. More analysis as prices unfold and the US elections pass.
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