U.S dollar index long-term technical analysis

U.S. dollar index has been in a strong bullish trend after the inflation numbers continue to increase and the Fed decide to play the interest-rate hike aggressively. However, the recent trend of inflation shows a slowing down, and recently the Fed FOMC minutes of the meeting also mention the change of stance by the Fed.

At the current time, the index might start a bearish correction and traders could see strength in other major currencies against the U.S. dollar.

New Month

Monthly chart

The index situation on the monthly chart is bearish as the index falls sharply after the touch on the Fibonacci extension. The bearish movement might continue to test the previously broken swing high or toward the 100.00 handles. Traders will observe closely the index reactions near the levels. If there are major bullish reactions then traders could enter long positions in the U.S. dollar.

Weekly chart

The weekly chart shows sharp bearish movement which broke below the 23.6% retracement level. If the index continues the bearish movement then traders could expect continuation toward the 50% and 61.8% Fibonacci Retracement levels. Similar to the monthly outlook, traders will monitor closely the index reactions near support levels.

Daily chart

On the daily chart, the U.S. dollar index is trading lower and soon will reach the daily SMA 200. If the index could bounce from the level then the 23.6% Fibonacci level will become a resistance level to watch. Traders will stay careful about taking long positions as the overall trend has turned bearish on the higher time frame. A bounce might happen but traders will quickly close bullish positions when there is bearish reactions from resistance levels.

Trade plan (For U.S dollar pair)

The overall market situation might change after the Fed’s latest FOMC meeting. The market might start to expect the Fed to unwind the tight interest-rate policies but also will stay cautious about rising inflation numbers. If the inflation numbers start to increase again then the U.S. dollar index will get a second wind to trade upward.

Based on the current situation, the U.S. dollar index might weaken into the last FOMC meeting this year. Any surprise will come from inflation numbers. If the number continues to increase then the U.S. dollar index will turn higher. On the other hand, a softer-than-expected inflation number is a bearish confirmation for the U.S. dollar index.