U.S dollar index long-term technical analysis

Inflation numbers and the Fed decision continue weighing the market sentiment. Yesterday, U.S inflation numbers show higher than expected numbers which bring more bullish pressure to the U.S dollar index. Despite the situation, the inflation numbers actually decreasing and might show a peaking indication.

If the next inflation numbers show further decline then we might see a bearish reversal in the U.S dollar index.

New Month

Monthly chart

U.S dollar index has been in a bullish trend after a breakout above the 2017 high. The index set a new high and keeps printing new higher highs each month. This month, it reached our first Fibonacci extension target and might continue upward to reach the second target. Traders who have no long positions in the U.S dollar might want to stay sideline for now and avoid entering short positions.

Wait until major bearish reactions happen near the target before starting to shift from bullish to bearish sentiment.

Weekly chart

On the weekly chart, the U.S dollar index hanging near the top and recently undergo a bearish correction. It seems the bearish correction was short-lived as the index currently trading upward. As long as the index continues moving up and prints a new higher high and higher low, traders better avoid entering short positions in the U.S dollar.

Daily chart

Similar to the outlook in the weekly chart, the U.S dollar index produces a major bullish reaction near the 107.50 support level. The index surpasses two days’ bearish candlestick high and is set to continue the upward movement. No need to change outlook, traders will stick with long positions in the U.S dollar for now.

Trade plan (For U.S dollar pair)

A bearish pullback is in progress toward the 100.00 – 100.30 and 99.40 support levels. Traders will wait for the index to reach support levels to enter long positions on bullish reactions. It is better to avoid shorting the U.S dollar as the fundamental situation is in favor of a strong U.S dollar.