Strategic trade
Trade view / 03 October 2016 at 0:29 GMT

Bearish then bullish: the USD index outlook this week

Analyst / PIA First
United Kingdom
Instrument: USDINDEXDEC16
Price target:
Market price:

Monthly – For the past 19 months, the USD index has consolidated broadly within the 100.00 to 92.50 range. The bullish outside month from May offers a mild upward bias.

We have a Fibonacci confluence area at 102.10-15. This is the 61.8% pullback from 121.29-71.05 and the 161.8% extension from 71.00-90.25.

USD index, monthly trend

USD Index M

Source: Saxo Bank. Create your own charts with SaxoTrader; click here to learn more. 

Weekly – The trend line is in a corrective channel. A full AB=CD formation would take the index to 99.79. Following a break there, the 161.8% extension is seen at 101.28, and a move toward the higher time-frame target area.

USD index, weekly trendUSD Index W

Source: Saxo Bank

Daily – There is a bullish channel with inside legs mixed and volatile. As long as the channel base holds at 94.90, then the bias remains bullish.

A full AB=CD formation would take the index to 99.75, just inside the psychological 100.00 Big Figure level. The previous swing high at 97.62 poses a formidable barrier.

USD index, daily trendUSD Index D

Source: Saxo Bank 

Intraday one (four-hour) – We are going to show two outlooks here. Both are bullish but with differing support.

In the first chart, we had a head and shoulders breakout on September 21. However, this was quickly reversed and we moved back inside the channel (that is, it was a false breakout). The bearish outside candle from Friday's high is a concern for USD bulls and we could see a full AB=CD formation down to Fibonacci confluence area at 94.58-52 (78.6% pullback and 127.2% extension).

We would need to see a sharp move to the upside from this solid support, because the daily chart needs to see a close within the channel base at 94.90

USD index, first intraday chart (four-hour)
USD Index 1

 Source: Saxo Bank

Intraday two (four-hour) – The second intraday chart highlights a potential bullish ascending triangle formation (a break of 96.25 is needed to confirm the pattern). The trend line support that has to hold is 94.90 (which is the same as the daily channel).

The main concern here is that we have no DeMark counts that would be close to posting a corrections of exhaustion counts at the start of the week. Can we really sit around these levels up to the release of US nonfarm payrolls data on Friday?

USD index, second intraday chart (four-hour)
USD Index 2

Source: Saxo Bank

Bear then bull

There is cause to be bullish in most timeframes, but we would prefer to buy dips close to 94.50 toward the end of the week.

There is ample scope for USD selling before bulls reappear. So it's a case of bear, then bull. 

Management and risk description


Entry: Buying USDs close to 94.50.

Stop: 94.00.

Target: 96.00.

Time horizon: this week.

— Edited by Robert Ryan

Non-independent investment research disclaimer applies. Read more


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