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CFD: Ideas You Can Trade - USDIndex Pullback From 50% Fibonacci Line

Posted by Steven Hatzakis on Jan 28, 2015 2:09:00 PM

USDIndex: Reversal from Jan. 23rd High of 95.75 Coincides with Long-Term Resistance and Fib-Retracement Line

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 94.62 around time of publication.

Last time the USDIndex reviewed in Ideas You Can Trade, support was building above 88.70 and since then the steeper bullish channel (point 4 on chart below) has continued to maintain the uptrend - with an even-more bullish breakout to the upside of that channel unfolding last week. 

The that the followed on January 23rd near 95.75 is consistent with both the long term bullish resistance line seen in the additional weekly chart further below (upper line of green bullish channel) and the 50% Fibonacci Retracement line drawn on that same weekly candle chart.

Because the index has since pulled-back towards current levels - support may be sought on top or within the steeper bullish channel that has been the main trend driver - until a higher high or 95.75 is re-tested. Such a pullback is healthy in an already-steep bullish market for the USDIndex, and will likely be a brief (correction) as the uptrend resumes afterwords.

If the pullback doesn't continue (from here), then 95.75 would need to be targeted very soon, to maintain the very steep trend line (see steep blue line on daily candle chart below). 

Below are examples of how to trade a bearish continuation or a bullish reversal:

1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 95.02 with a Limit to take profit @ 95.71 and a stop-loss @ 94.39 Risk/Reward Summary: Limit risk = +69 points profit / (-63) Stop-loss risk = Gain to Loss ratio = 1.09

2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 93.93 with a Limit to take profit @ 93.22 and a stop-loss @ 94.54 Risk/Reward Summary: Limit risk = +71 points profit /(-61) Stop-loss risk = Gain to Loss Ratio = 1.16

Medium Term Daily Candle Chart: 

USDIndexDaily january 28 2015 note

Longer Term Weekly Candle Chart:

USDIndexWeekly January 28 2015 LONG TERM

Topics: forex trading, US Dollar, DXY, United States Dollar, US, USDIndex, USD Index, DXC, contract for difference, technical analysis, USD, $, USDX, cfd, indices, index


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