USDIndex: Resistance May Turn To Support if Prices Hold Above Long Term Trend Line
The daily candle chart below shows the medium term price history the USDIndex contract for difference (CFD) which aims to track the underlying US Dollar index (DXY) and is trading around 85.95 around time of publication today.
Last Friday - following a sharp drop - when the USDIndex was last reviewed in the Ideas You Can Trade series it had recovered from that drop and has since regained the long term bullish resistance line (point 1 in red on chart below). If the Uptrend is regained fully, the next target may be only 95 points away near the prior high reached earlier in October.
However, if the recovery of the last 8 trading days is a correction in a downtrend, then a larger drop should follow, as the bearish momentum resumes. The medium term trend is mostly bullish, with only most of October providing volatility that coincided with major indices and global markets. Therefore, if that volatility subsides the prior trend may resume, whereas if it continues then larger drop could follow. Longer term view is also provided in the additional weekly candle chart further below.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 86.10 with a Limit to take profit @ 86.71 and a stop-loss @ 85.73 Risk/Reward Summary: Limit risk = +61 points profit / (-37) Stop-loss risk = Gain to Loss ratio = 1.64
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 85.63 with a Limit to take profit @ 85.32 and a stop-loss @ 85.93 Risk/Reward Summary: Limit risk = +31 points profit /(-30) Stop-loss risk = Gain to Loss Ratio = 1.03
Medium Term Daily Candle Chart:
Longer Term Weekly Candle Chart: