In September, after a long move lower, the US Dollar Index stopped falling. It had moved past the base of a long term consolidative channel at that point so sentiment was bear’ed up for a full on crash. But it stopped falling at a 113% extension of the latest bull leg, a point where Fibonacci based traders would be looking for a possible change.
From that September bottom the Dollar Index started on a path higher. It met resistance when it reached what was at the time thought to just be a Dead Cat Bounce top at the August high, and reversed back lower. But it made a higher low. The reversal from that October low set up a possible inverse Head and Shoulders bottom. And with a strong move higher October 26th it broke through the neckline, confirming the pattern and price objective to at least 97.30.
DXY Daily Chart
But the Dollar Index stalled there. No follow through. It consolidated for 2 weeks with a slow drift back lower. But then Monday it broke back below the neckline. Party over right? No, not really. The pattern is not negated until it makes a lower low, below the Right Shoulder low from October 13th. It is simple trend analysis. Until then it is just continuing a series of higher highs and higher lows – an uptrend. The uptrend ends upon making a lower low. Not time to give up yet on the US dollar.
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