USDIndex: Today's Sharp Pullback Was Halted on the Bullish Support Line Where 98.00 was Just Pierced
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 98.10 - after moving sharply lower in the trading session -and just off a fresh session low of 97.98 (around time of publication).
Last time USDIndex was reviewed in Ideas You Can Trade, the momentum was described as fiercely bullish and the expectation was that it would continue towards 100.00, and subsequently did and nearly reached 101.00 before beginning its retracement towards current levels.
However, USDIndex dropped sharply today and the session low coincides almost exactly on the bullish support line (white line on chart below) that had been forecasted (drawn) previously, and that is now being tested. This level also coincides around 98.00 which was also briefly pierced on the last session low, mentioned above.
That is, if that support holds - then USDIndex should start to recover, whereas a break below that support line could enable a bearish continuation - as today's sharp move has a lot of momentum to possibly propel a deeper correction - if the bullish support line fails.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 100.01 with a Limit to take profit @ 100.70 and a stop-loss @ 99.49 Risk/Reward Summary: Limit risk = +69 points profit / (-52) Stop-loss risk = Gain to Loss ratio = 1.33
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 97.75 with a Limit to take profit @ 97.01 and a stop-loss @ 98.49 Risk/Reward Summary: Limit risk = +74 points profit /(-74) Stop-loss risk = Gain to Loss Ratio = 1.00
Medium Term Daily Candle Chart: