USDIndex: Trading Above Long Term Resistance of 88.70 for Third Consecutive Day
The daily candle chart below shows the medium term price history for the USDIndex - which is a contract for difference (CFD) that aims to track the underlying US Dollar index (DXY). Today the index is trading near 88.89 (around time of publication).
Last time the USDIndex reviewed in Ideas You Can Trade, resistance near 88.35 was overcome as the index moved higher and was approaching a multi-year peak near 88.70 that had been last reached on June 10, 2010. That high was taken out earlier this week with a new multi-year high reached yesterday near 89.17, and with the index above 88.70 for the third consecutive trading day.
Since 88.70 has already failed to hold the bullish momentum unless that long term resistance comes back into play, the uptrend seems like it will persist - and provided that 89.17 can be overcome.
However, a larger pullback in the index could still be healthy and not affect the overall medium term trend as a number of bullish support lines still exist under current prices that could lift the index back up - in the event it corrected and returned towards the 86.00- 87.00 level in the short term. However for now the index still looks more bullish than it does bearish in both the very short term and near term, and with 88.70 appearing to act as support rather than resistance.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 89.18 with a Limit to take profit @ 89.50 and a stop-loss @ 88.89 Risk/Reward Summary: Limit risk = +32 points profit / (-29) Stop-loss risk = Gain to Loss ratio = 1.10
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 88.35 with a Limit to take profit @ 87.99 and a stop-loss @ 88.60 Risk/Reward Summary: Limit risk = +36 points profit /(-25) Stop-loss risk = Gain to Loss Ratio = 1.44
Medium Term Daily Candle Chart:
Longer Term Weekly Candle Chart: