Dollar Index Forecast: Could revisit trendline support
|- Signs of bullish exhaustion in the weekly chart, bearish reversal in the daily chart.
- The DXY could revisit trendline support in the short-term
The dollar index (DXY), which tracks the value of the greenback against majors, seems to have topped out for now and could revisit the long-run descending trendline support (seen today at 91.30)
Weekly chart
The chart shows the DXY broke above the long-term falling trendline, indicating bull breakout. The 5-week moving average (MA) and the 10-week MA are trending north in favor of the bulls.
However, the index created a doji-like candle with a long upper shadow, signaling the rally from the April low of 89.23 has run out of steam. The candle also marks a failure on the part of the bulls to build on a break above the descending (bearish) 50-week moving average (MA).
Daily chart
The bearish reversal as represented by last Wednesday's spinning top and Thursday's bearish follow-through indicates the rally from the low of 89.23 has run out of steam and the bears have regained control.
The 5-day MA and the 10-day MA have begun rolling over in favor of the bears. The relative strength index (RSI) has also rolled over from the overbought territory in favor of the USD bears.
The DXY looks set to test the 200-day MA lined up at 91.96 in the short-run and may possibly extend the decline to trendline support, currently seen at 91.30. Further losses are ruled out as long as the 5-week MA and the 10-week MA is trending north.
A close above the 10-day MA, currently seen at 92.68, would abort the short-term bearish outlook.
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