WorldWideMarkets Community

Forex Trading, Market News & Technical Analysis

CFD: Ideas You Can Trade - USDIndex Pulls-Back Into Bullish Channel

Posted by Steven Hatzakis on Feb 3, 2015 3:38:00 PM

USDIndex: Bullish Momentum Easing as Pullback Pushes Index into (Less) Steeper Bullish Channel 

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 closed the session near 93.72 around time of publication and was lower as US factory orders declined, and the RBA's rate cut in Australia put bearish pressure on the greenback.

Last time the USDIndex was reviewed in Ideas You Can Trade, last month, a ceiling was reached under a long-term resistance line near 95.75, and a continuation of that pullback was expected and described as healthy within an overall bullish trend.

Today the USDIndex lost its support on the upper line of a steeper bullish channel (point 4 on chart below in white) and has since re-entered the aforementioned channel as the bullish momentum eases. While this channel is less steep than the previous ultra-bullish momentum of recent weeks (see blue lines on chart below), the channels trajectory still points towards that prior high which may be retested sometime during February.

Unless the upper resistance line of the steeper bullish channel is regained, a bearish continuation should follow where support should exist on the lower line of the channel near 93.00 - over the next few days. If the upper resistance line of the channel is regained, however, then 95.75 could become within very close range much sooner.

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

1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 94.31 with a Limit to take profit @ 94.99 and a stop-loss @ 93.79 Risk/Reward Summary: Limit risk = +68 points profit / (-52) Stop-loss risk = Gain to Loss ratio = 1.30

2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 93.39 with a Limit to take profit @ 93.01 and a stop-loss @ 93.69 Risk/Reward Summary: Limit risk = +38 points profit /(-30) Stop-loss risk = Gain to Loss Ratio = 1.26

Medium Term Daily Candle Chart: 

USDIndexDaily February 3 2015 note

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

 

Tools & Educational Resources

Forex 101LEARN MORE >>
Learn the basics of Forex and how to practice trading the markets.

GlossaryLEARN MORE >>
Confused by the language? Click here and search for key trading terms.

FAQ CenterLEARN MORE >>
Browse our frequently asked questions and find your answers right away.

VideosLEARN MORE >>
Access to the educational lessons, webinars and platform walkthroughs.

READY TO TRY THE MARKETS?

Get started with a FREE $10,000 Demo Account and experience the Forex Market RISK FREE!