The Dollar Index continues to trade within the downward sloping trend channel with no sign of strength to reverse the intermediate and short-term trend. Prices, however, bounced at the 81.50 support level where the 76.4% Fibonacci retracement also is. The short-term downward sloping blue trend line in the daily chart has been broken upwards but bulls need more evidence of a trend change.
Of course the 76.4% Fibonacci retracement is an important support level, but bulls will need to show strength and break resistance levels of 82 and 82.35. Unless we see an impulsive upward move that will break resistances we cannot be certain of a trend reversal. The evidence suggests that the reversal will come soon, but patience is also important. It is also important for our bulish view not to see a breakdown of prices below 81.50, as this will diminish the chances of an upward move.
Concluding, the bulls will need to see an upward break out of the downward sloping channel shown in the hourly chart above. This will be a good sign of trend reversal. Adding to long positions above 82.35 is also another strategy where we add to strength as resistance is broken and momentum for bulls builds up. The entire move from 84.75 remains corrective according to our analysis and that is why we still favor the upside potential.
The material has been provided by InstaForex Company - www.instaforex.com
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