USDIndex: 88.70 Still Target in Uptrend as Bullish Channel Support Line Emerges
The daily candle chart below shows the medium term price history for the USDIndex contract for difference (CFD) - which aims to track the underlying US Dollar index. Today the index is trading near 87.59 (around time of publication).
Last time the USDIndex was reviewed in the Ideas You Can Trade series, resistance near 88.27 had been reached, and since then the index had pulled back briefly and then subsequently retested near this level reaching 88.35 in the last trading session.
While 88.70 still remains a valid upside target within the overall bullish trend, it appears that a support line for a steeper bullish channel has emerged (point 4 on chart in white color). This support line coincides near todays low, and could therefore help prevent a larger pullback, whereas if this line is breached then a bearish continuation could follow.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 87.98 with a Limit to take profit @ 88.35 and a stop-loss @ 87.64 Risk/Reward Summary: Limit risk = +37 points profit / (-34) Stop-loss risk = Gain to Loss ratio = 1.08
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 87.13 with a Limit to take profit @ 86.88 and a stop-loss @ 87.35 Risk/Reward Summary: Limit risk = +25 points profit /(-22) Stop-loss risk = Gain to Loss Ratio = 1.13
Medium Term Daily Candle Chart: