The Dollar Index has broken support and made new lows. Prices never managed to produce a bullish signal and our neutral stance protected us. On the contrary, not only prices reversed upwards but instead were pressured lower after heavy selling following Bernanke's speech. The Dollar Index has now broken important support levels and it has moved outside of the upward longer-term channel.
This is a negative signal for the longer-term trend of the Dollar as it opens the way to much lower support levels after breaking out and below the channel. Dollar weakness could lead the index towards 77.50 in the longer term or even 76. The trend is downward and will only change if prices manage to take back the 81 level and then break above 82.70.
In the short term, prices are expected to make an upward bounce as a counter move to the downward spike. We could expect prices to reach 80.70-80, but with current conditions I do not see a potential trend reversal at this time. Concluding we remain neutral as the volatility in this market does not provide any trading opportunity with a good risk/reward ratio.
The material has been provided by InstaForex Company - www.instaforex.com
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