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Forex: Ideas You Can Trade - USDIndex Exits Bottom of Bullish Channel

Posted by Steven Hatzakis on Apr 16, 2015 3:42:00 PM

USDIndex: Steep Bearish Momentum Developing Since Support Above 100.00 Lost and Channel Support Failed

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 around 97.77 around time of publication and is just near session lows of 97.45. 

After failing to hold above 100.00 earlier this week when USDIndex was last reviewed in Ideas You Can Trade, the short term trend has since turned bearish, and has moved lower in the following three trading days including today. In addition, the lower-low reached today has broken under the lower support line of the bullish channel (green lines on chart below) - further signaling a bearish continuation.

If the bullish channel is regained then a bearish continuation could be avoided, otherwise the USDIndex appears to be already into a steep dive where it may look lower for support before bouncing higher again. 

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

1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 98.42 with a Limit to take profit @ 99.40 and a stop-loss @ 97.51 Risk/Reward Summary: Limit risk = +98 points profit / (-91) Stop-loss risk = Gain to Loss Ratio = 1.07

2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 97.38 with a Limit to take profit @ 96.50 and a stop-loss @ 98.03 Risk/Reward Summary: Limit risk = +88 points profit /(-65) Stop-loss risk = Gain to Loss Ratio = 1.35

Medium Term Daily Candle Chart:

USDIndexDaily April 16 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

 

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